Correlation Between HSBC Holdings and MercadoLibre
Can any of the company-specific risk be diversified away by investing in both HSBC Holdings 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 HSBC Holdings and MercadoLibre into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HSBC Holdings plc and MercadoLibre, you can compare the effects of market volatilities on HSBC Holdings 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 HSBC Holdings with a short position of MercadoLibre. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and MercadoLibre.
Diversification Opportunities for HSBC Holdings and MercadoLibre
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between HSBC and MercadoLibre is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings plc and MercadoLibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MercadoLibre and HSBC Holdings 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 HSBC Holdings plc 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 HSBC Holdings i.e., HSBC Holdings and MercadoLibre go up and down completely randomly.
Pair Corralation between HSBC Holdings and MercadoLibre
Assuming the 90 days trading horizon HSBC Holdings is expected to generate 1.94 times less return on investment than MercadoLibre. But when comparing it to its historical volatility, HSBC Holdings plc is 2.16 times less risky than MercadoLibre. It trades about 0.19 of its potential returns per unit of risk. MercadoLibre is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 174,980 in MercadoLibre on November 8, 2024 and sell it today you would earn a total of 15,380 from holding MercadoLibre or generate 8.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HSBC Holdings plc vs. MercadoLibre
Performance |
| Timeline |
| HSBC Holdings plc |
| MercadoLibre |
HSBC Holdings and MercadoLibre Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC Holdings and MercadoLibre
The main advantage of trading using opposite HSBC Holdings and MercadoLibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings 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.| HSBC Holdings vs. Actinogen Medical Limited | HSBC Holdings vs. Casio Computer CoLtd | HSBC Holdings vs. PEPTONIC MEDICAL | HSBC Holdings vs. Diamyd Medical AB |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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