Correlation Between MercadoLibre, and Amazon
Can any of the company-specific risk be diversified away by investing in both MercadoLibre, and Amazon 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 Amazon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MercadoLibre, and Amazon Inc, you can compare the effects of market volatilities on MercadoLibre, and Amazon 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 Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of MercadoLibre, and Amazon.
Diversification Opportunities for MercadoLibre, and Amazon
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MercadoLibre, and Amazon is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding MercadoLibre, and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon 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 Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of MercadoLibre, i.e., MercadoLibre, and Amazon go up and down completely randomly.
Pair Corralation between MercadoLibre, and Amazon
Assuming the 90 days trading horizon MercadoLibre, is expected to generate 3.07 times less return on investment than Amazon. But when comparing it to its historical volatility, MercadoLibre, is 1.23 times less risky than Amazon. It trades about 0.06 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 45,600 in Amazon Inc on September 19, 2024 and sell it today you would earn a total of 138,900 from holding Amazon Inc or generate 304.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
MercadoLibre, vs. Amazon Inc
Performance |
| Timeline |
| MercadoLibre, |
| Amazon Inc |
MercadoLibre, and Amazon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MercadoLibre, and Amazon
The main advantage of trading using opposite MercadoLibre, and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MercadoLibre, position performs unexpectedly, Amazon 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 Amazon will offset losses from the drop in Amazon's long position.| MercadoLibre, vs. Alibaba Group Holding | MercadoLibre, vs. Apple Inc DRC | MercadoLibre, vs. Alphabet Inc Class A CEDEAR | MercadoLibre, vs. Amazon Inc |
| Amazon vs. Alibaba Group Holding | Amazon vs. Edesa Holding SA | Amazon vs. Vista Energy, SAB | Amazon vs. American Express Co |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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