Correlation Between MercadoLibre, and Merck
Can any of the company-specific risk be diversified away by investing in both MercadoLibre, and Merck 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 Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MercadoLibre, and Merck Company, you can compare the effects of market volatilities on MercadoLibre, and Merck 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 Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of MercadoLibre, and Merck.
Diversification Opportunities for MercadoLibre, and Merck
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between MercadoLibre, and Merck is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding MercadoLibre, and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company 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 Merck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck Company has no effect on the direction of MercadoLibre, i.e., MercadoLibre, and Merck go up and down completely randomly.
Pair Corralation between MercadoLibre, and Merck
Assuming the 90 days trading horizon MercadoLibre, is expected to under-perform the Merck. In addition to that, MercadoLibre, is 1.17 times more volatile than Merck Company. It trades about -0.16 of its total potential returns per unit of risk. Merck Company is currently generating about 0.23 per unit of volatility. If you would invest 2,137,484 in Merck Company on September 19, 2024 and sell it today you would earn a total of 165,016 from holding Merck Company or generate 7.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MercadoLibre, vs. Merck Company
Performance |
| Timeline |
| MercadoLibre, |
| Merck Company |
MercadoLibre, and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MercadoLibre, and Merck
The main advantage of trading using opposite MercadoLibre, and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MercadoLibre, position performs unexpectedly, Merck 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 Merck will offset losses from the drop in Merck's long position.| MercadoLibre, vs. Alibaba Group Holding | MercadoLibre, vs. Apple Inc DRC | MercadoLibre, vs. Alphabet Inc Class A CEDEAR | MercadoLibre, vs. Amazon Inc |
| Merck vs. Edesa Holding SA | Merck vs. Vista Energy, SAB | Merck vs. United States Steel | Merck vs. Central Puerto SA |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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