Correlation Between Lloyds Banking and MercadoLibre
Can any of the company-specific risk be diversified away by investing in both Lloyds Banking 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 Lloyds Banking and MercadoLibre into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lloyds Banking Group and MercadoLibre, you can compare the effects of market volatilities on Lloyds Banking 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 Lloyds Banking with a short position of MercadoLibre. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lloyds Banking and MercadoLibre.
Diversification Opportunities for Lloyds Banking and MercadoLibre
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Lloyds and MercadoLibre is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and MercadoLibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MercadoLibre and Lloyds Banking 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 Lloyds Banking Group 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 Lloyds Banking i.e., Lloyds Banking and MercadoLibre go up and down completely randomly.
Pair Corralation between Lloyds Banking and MercadoLibre
Assuming the 90 days trading horizon Lloyds Banking is expected to generate 1.68 times less return on investment than MercadoLibre. In addition to that, Lloyds Banking is 1.09 times more volatile than MercadoLibre. It trades about 0.05 of its total potential returns per unit of risk. MercadoLibre is currently generating about 0.09 per unit of volatility. If you would invest 3,810 in MercadoLibre on September 14, 2024 and sell it today you would earn a total of 5,565 from holding MercadoLibre or generate 146.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Lloyds Banking Group vs. MercadoLibre
Performance |
| Timeline |
| Lloyds Banking Group |
| MercadoLibre |
Lloyds Banking and MercadoLibre Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lloyds Banking and MercadoLibre
The main advantage of trading using opposite Lloyds Banking and MercadoLibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lloyds Banking 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.| Lloyds Banking vs. Metalurgica Gerdau SA | Lloyds Banking vs. Healthpeak Properties | Lloyds Banking vs. Zoom Video Communications | Lloyds Banking vs. Unity Software |
| MercadoLibre vs. Technos SA | MercadoLibre vs. Palantir Technologies | MercadoLibre vs. Align Technology | MercadoLibre vs. Take Two Interactive Software |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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