Correlation Between IShares Trust and MercadoLibre
Can any of the company-specific risk be diversified away by investing in both IShares Trust and MercadoLibre at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining IShares Trust and MercadoLibre into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Trust and MercadoLibre, you can compare the effects of market volatilities on IShares Trust and MercadoLibre and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in IShares Trust with a short position of MercadoLibre. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Trust and MercadoLibre.
Diversification Opportunities for IShares Trust and MercadoLibre
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between IShares and MercadoLibre is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and MercadoLibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MercadoLibre and IShares Trust is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on iShares Trust are associated (or correlated) with MercadoLibre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MercadoLibre has no effect on the direction of IShares Trust i.e., IShares Trust and MercadoLibre go up and down completely randomly.
Pair Corralation between IShares Trust and MercadoLibre
Assuming the 90 days trading horizon iShares Trust is expected to under-perform the MercadoLibre. But the etf apears to be less risky and, when comparing its historical volatility, iShares Trust is 3.96 times less risky than MercadoLibre. The etf trades about -0.04 of its potential returns per unit of risk. The MercadoLibre is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 4,092,123 in MercadoLibre on August 25, 2024 and sell it today you would earn a total of 4,446 from holding MercadoLibre or generate 0.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.35% |
| Values | Daily Returns |
iShares Trust vs. MercadoLibre
Performance |
| Timeline |
| iShares Trust |
| MercadoLibre |
IShares Trust and MercadoLibre Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Trust and MercadoLibre
The main advantage of trading using opposite IShares Trust and MercadoLibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Trust position performs unexpectedly, MercadoLibre can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in MercadoLibre will offset losses from the drop in MercadoLibre's long position.| IShares Trust vs. Vanguard Index Funds | IShares Trust vs. Vanguard Index Funds | IShares Trust vs. SPDR SP 500 | IShares Trust vs. iShares Trust |
| MercadoLibre vs. Hoteles City Express | MercadoLibre vs. Southwest Airlines | MercadoLibre vs. The Bank of | MercadoLibre vs. Genworth Financial |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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