Correlation Between MercadoLibre and ZOZO
Can any of the company-specific risk be diversified away by investing in both MercadoLibre and ZOZO 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 ZOZO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MercadoLibre and ZOZO Inc, you can compare the effects of market volatilities on MercadoLibre and ZOZO 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 ZOZO. Check out your portfolio center. Please also check ongoing floating volatility patterns of MercadoLibre and ZOZO.
Diversification Opportunities for MercadoLibre and ZOZO
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between MercadoLibre and ZOZO is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding MercadoLibre and ZOZO Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZOZO 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 ZOZO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZOZO Inc has no effect on the direction of MercadoLibre i.e., MercadoLibre and ZOZO go up and down completely randomly.
Pair Corralation between MercadoLibre and ZOZO
Given the investment horizon of 90 days MercadoLibre is expected to generate 0.09 times more return on investment than ZOZO. However, MercadoLibre is 11.48 times less risky than ZOZO. It trades about 0.08 of its potential returns per unit of risk. ZOZO Inc is currently generating about -0.13 per unit of risk. If you would invest 89,648 in MercadoLibre on August 30, 2024 and sell it today you would earn a total of 114,828 from holding MercadoLibre or generate 128.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 42.83% |
| Values | Daily Returns |
MercadoLibre vs. ZOZO Inc
Performance |
| Timeline |
| MercadoLibre |
| ZOZO Inc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
MercadoLibre and ZOZO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MercadoLibre and ZOZO
The main advantage of trading using opposite MercadoLibre and ZOZO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MercadoLibre position performs unexpectedly, ZOZO 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 ZOZO will offset losses from the drop in ZOZO's long position.| MercadoLibre vs. PDD Holdings | MercadoLibre vs. JD Inc Adr | MercadoLibre vs. Alibaba Group Holding | MercadoLibre vs. Global E Online |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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