Correlation Between MercadoLibre and Harmony Gold
Can any of the company-specific risk be diversified away by investing in both MercadoLibre and Harmony Gold 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 MercadoLibre and Harmony Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MercadoLibre and Harmony Gold Mining, you can compare the effects of market volatilities on MercadoLibre and Harmony Gold 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 MercadoLibre with a short position of Harmony Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of MercadoLibre and Harmony Gold.
Diversification Opportunities for MercadoLibre and Harmony Gold
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MercadoLibre and Harmony is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding MercadoLibre and Harmony Gold Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harmony Gold Mining and MercadoLibre 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 MercadoLibre are associated (or correlated) with Harmony Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harmony Gold Mining has no effect on the direction of MercadoLibre i.e., MercadoLibre and Harmony Gold go up and down completely randomly.
Pair Corralation between MercadoLibre and Harmony Gold
Assuming the 90 days trading horizon MercadoLibre is expected to generate 0.96 times more return on investment than Harmony Gold. However, MercadoLibre is 1.04 times less risky than Harmony Gold. It trades about -0.12 of its potential returns per unit of risk. Harmony Gold Mining is currently generating about -0.25 per unit of risk. If you would invest 2,087,500 in MercadoLibre on September 19, 2024 and sell it today you would lose (345,000) from holding MercadoLibre or give up 16.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.62% |
| Values | Daily Returns |
MercadoLibre vs. Harmony Gold Mining
Performance |
| Timeline |
| MercadoLibre |
| Harmony Gold Mining |
MercadoLibre and Harmony Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MercadoLibre and Harmony Gold
The main advantage of trading using opposite MercadoLibre and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MercadoLibre position performs unexpectedly, Harmony Gold 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 Harmony Gold will offset losses from the drop in Harmony Gold's long position.| MercadoLibre vs. Harmony Gold Mining | MercadoLibre vs. Telecom Argentina | MercadoLibre vs. Transportadora de Gas | MercadoLibre vs. Agrometal SAI |
| Harmony Gold vs. Telecom Argentina | Harmony Gold vs. Agrometal SAI | Harmony Gold vs. Transportadora de Gas | Harmony Gold vs. Compania de Transporte |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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