Correlation Between MercadoLibre and Micron Technology
Can any of the company-specific risk be diversified away by investing in both MercadoLibre and Micron Technology 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 Micron Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MercadoLibre and Micron Technology, you can compare the effects of market volatilities on MercadoLibre and Micron Technology 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 Micron Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of MercadoLibre and Micron Technology.
Diversification Opportunities for MercadoLibre and Micron Technology
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between MercadoLibre and Micron is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding MercadoLibre and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology 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 Micron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micron Technology has no effect on the direction of MercadoLibre i.e., MercadoLibre and Micron Technology go up and down completely randomly.
Pair Corralation between MercadoLibre and Micron Technology
Assuming the 90 days trading horizon MercadoLibre is expected to under-perform the Micron Technology. In addition to that, MercadoLibre is 1.77 times more volatile than Micron Technology. It trades about -0.02 of its total potential returns per unit of risk. Micron Technology is currently generating about -0.01 per unit of volatility. If you would invest 205,001 in Micron Technology on September 4, 2024 and sell it today you would lose (3,001) from holding Micron Technology or give up 1.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MercadoLibre vs. Micron Technology
Performance |
| Timeline |
| MercadoLibre |
| Micron Technology |
MercadoLibre and Micron Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MercadoLibre and Micron Technology
The main advantage of trading using opposite MercadoLibre and Micron Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MercadoLibre position performs unexpectedly, Micron Technology 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 Micron Technology will offset losses from the drop in Micron Technology's long position.| MercadoLibre vs. Grupo Carso SAB | MercadoLibre vs. Applied Materials | MercadoLibre vs. First Majestic Silver | MercadoLibre vs. Genworth Financial |
| Micron Technology vs. The Bank of | Micron Technology vs. First Majestic Silver | Micron Technology vs. DXC Technology | Micron Technology vs. United States Steel |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios |