Correlation Between MercadoLibre and Meituan ADR
Can any of the company-specific risk be diversified away by investing in both MercadoLibre and Meituan ADR 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 Meituan ADR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MercadoLibre and Meituan ADR, you can compare the effects of market volatilities on MercadoLibre and Meituan ADR 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 Meituan ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of MercadoLibre and Meituan ADR.
Diversification Opportunities for MercadoLibre and Meituan ADR
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MercadoLibre and Meituan is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding MercadoLibre and Meituan ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meituan ADR 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 Meituan ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meituan ADR has no effect on the direction of MercadoLibre i.e., MercadoLibre and Meituan ADR go up and down completely randomly.
Pair Corralation between MercadoLibre and Meituan ADR
Given the investment horizon of 90 days MercadoLibre is expected to generate 0.7 times more return on investment than Meituan ADR. However, MercadoLibre is 1.43 times less risky than Meituan ADR. It trades about 0.06 of its potential returns per unit of risk. Meituan ADR is currently generating about 0.02 per unit of risk. If you would invest 111,232 in MercadoLibre on November 2, 2024 and sell it today you would earn a total of 83,270 from holding MercadoLibre or generate 74.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MercadoLibre vs. Meituan ADR
Performance |
| Timeline |
| MercadoLibre |
| Meituan ADR |
MercadoLibre and Meituan ADR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MercadoLibre and Meituan ADR
The main advantage of trading using opposite MercadoLibre and Meituan ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MercadoLibre position performs unexpectedly, Meituan ADR 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 Meituan ADR will offset losses from the drop in Meituan ADR's long position.| MercadoLibre vs. PDD Holdings | MercadoLibre vs. JD Inc Adr | MercadoLibre vs. Alibaba Group Holding | MercadoLibre vs. Global E Online |
| Meituan ADR vs. Jd Com Inc | Meituan ADR vs. MOGU Inc | Meituan ADR vs. Oriental Culture Holding | Meituan ADR 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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