Correlation Between MercadoLibre and Coupang LLC
Can any of the company-specific risk be diversified away by investing in both MercadoLibre and Coupang LLC 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 Coupang LLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MercadoLibre and Coupang LLC, you can compare the effects of market volatilities on MercadoLibre and Coupang LLC 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 Coupang LLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of MercadoLibre and Coupang LLC.
Diversification Opportunities for MercadoLibre and Coupang LLC
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between MercadoLibre and Coupang is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding MercadoLibre and Coupang LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coupang LLC 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 Coupang LLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coupang LLC has no effect on the direction of MercadoLibre i.e., MercadoLibre and Coupang LLC go up and down completely randomly.
Pair Corralation between MercadoLibre and Coupang LLC
Given the investment horizon of 90 days MercadoLibre is expected to under-perform the Coupang LLC. In addition to that, MercadoLibre is 1.21 times more volatile than Coupang LLC. It trades about -0.03 of its total potential returns per unit of risk. Coupang LLC is currently generating about -0.04 per unit of volatility. If you would invest 2,498 in Coupang LLC on August 23, 2024 and sell it today you would lose (98.00) from holding Coupang LLC or give up 3.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MercadoLibre vs. Coupang LLC
Performance |
| Timeline |
| MercadoLibre |
| Coupang LLC |
MercadoLibre and Coupang LLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MercadoLibre and Coupang LLC
The main advantage of trading using opposite MercadoLibre and Coupang LLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MercadoLibre position performs unexpectedly, Coupang LLC 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 Coupang LLC will offset losses from the drop in Coupang LLC's long position.| MercadoLibre vs. PDD Holdings | MercadoLibre vs. JD Inc Adr | MercadoLibre vs. Alibaba Group Holding | MercadoLibre vs. Global E Online |
| Coupang LLC vs. MercadoLibre | Coupang LLC vs. PDD Holdings | Coupang LLC vs. JD Inc Adr | Coupang LLC vs. Alibaba Group Holding |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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