Correlation Between MercadoLibre and Baozun
Can any of the company-specific risk be diversified away by investing in both MercadoLibre and Baozun 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 Baozun into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MercadoLibre and Baozun Inc, you can compare the effects of market volatilities on MercadoLibre and Baozun 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 Baozun. Check out your portfolio center. Please also check ongoing floating volatility patterns of MercadoLibre and Baozun.
Diversification Opportunities for MercadoLibre and Baozun
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between MercadoLibre and Baozun is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding MercadoLibre and Baozun Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baozun Inc 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 Baozun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baozun Inc has no effect on the direction of MercadoLibre i.e., MercadoLibre and Baozun go up and down completely randomly.
Pair Corralation between MercadoLibre and Baozun
Given the investment horizon of 90 days MercadoLibre is expected to generate 1.18 times more return on investment than Baozun. However, MercadoLibre is 1.18 times more volatile than Baozun Inc. It trades about 0.05 of its potential returns per unit of risk. Baozun Inc is currently generating about -0.31 per unit of risk. If you would invest 205,609 in MercadoLibre on August 27, 2024 and sell it today you would earn a total of 4,446 from holding MercadoLibre or generate 2.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MercadoLibre vs. Baozun Inc
Performance |
| Timeline |
| MercadoLibre |
| Baozun Inc |
MercadoLibre and Baozun Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MercadoLibre and Baozun
The main advantage of trading using opposite MercadoLibre and Baozun positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MercadoLibre position performs unexpectedly, Baozun 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 Baozun will offset losses from the drop in Baozun's long position.| MercadoLibre vs. PDD Holdings | MercadoLibre vs. JD Inc Adr | MercadoLibre vs. Alibaba Group Holding | MercadoLibre vs. Global E Online |
| Baozun vs. PDD Holdings | Baozun vs. JD Inc Adr | Baozun vs. Global E Online | Baozun vs. Vipshop Holdings Limited |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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