Correlation Between D MARKET and MercadoLibre
Can any of the company-specific risk be diversified away by investing in both D MARKET 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 D MARKET and MercadoLibre into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between D MARKET Electronic Services and MercadoLibre, you can compare the effects of market volatilities on D MARKET 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 D MARKET with a short position of MercadoLibre. Check out your portfolio center. Please also check ongoing floating volatility patterns of D MARKET and MercadoLibre.
Diversification Opportunities for D MARKET and MercadoLibre
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between HEPS and MercadoLibre is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding D MARKET Electronic Services and MercadoLibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MercadoLibre and D MARKET 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 D MARKET Electronic Services 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 D MARKET i.e., D MARKET and MercadoLibre go up and down completely randomly.
Pair Corralation between D MARKET and MercadoLibre
Given the investment horizon of 90 days D MARKET Electronic Services is expected to generate 2.59 times more return on investment than MercadoLibre. However, D MARKET is 2.59 times more volatile than MercadoLibre. It trades about 0.07 of its potential returns per unit of risk. MercadoLibre is currently generating about 0.08 per unit of risk. If you would invest 211.00 in D MARKET Electronic Services on September 3, 2024 and sell it today you would earn a total of 86.00 from holding D MARKET Electronic Services or generate 40.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
D MARKET Electronic Services vs. MercadoLibre
Performance |
| Timeline |
| D MARKET Electronic |
| MercadoLibre |
D MARKET and MercadoLibre Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with D MARKET and MercadoLibre
The main advantage of trading using opposite D MARKET and MercadoLibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if D MARKET 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.| D MARKET vs. MercadoLibre | D MARKET vs. PDD Holdings | D MARKET vs. JD Inc Adr | D MARKET vs. Alibaba Group Holding |
| MercadoLibre vs. PDD Holdings | MercadoLibre vs. JD Inc Adr | MercadoLibre vs. Alibaba Group Holding | MercadoLibre vs. Global E Online |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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