Correlation Between MercadoLibre and Promotora
Can any of the company-specific risk be diversified away by investing in both MercadoLibre and Promotora 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 Promotora into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MercadoLibre and Promotora y Operadora, you can compare the effects of market volatilities on MercadoLibre and Promotora 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 Promotora. Check out your portfolio center. Please also check ongoing floating volatility patterns of MercadoLibre and Promotora.
Diversification Opportunities for MercadoLibre and Promotora
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between MercadoLibre and Promotora is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding MercadoLibre and Promotora y Operadora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Promotora y Operadora 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 Promotora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Promotora y Operadora has no effect on the direction of MercadoLibre i.e., MercadoLibre and Promotora go up and down completely randomly.
Pair Corralation between MercadoLibre and Promotora
Assuming the 90 days trading horizon MercadoLibre is expected to generate 3.85 times less return on investment than Promotora. In addition to that, MercadoLibre is 2.68 times more volatile than Promotora y Operadora. It trades about 0.03 of its total potential returns per unit of risk. Promotora y Operadora is currently generating about 0.27 per unit of volatility. If you would invest 16,997 in Promotora y Operadora on August 25, 2024 and sell it today you would earn a total of 1,704 from holding Promotora y Operadora or generate 10.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MercadoLibre vs. Promotora y Operadora
Performance |
| Timeline |
| MercadoLibre |
| Promotora y Operadora |
MercadoLibre and Promotora Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MercadoLibre and Promotora
The main advantage of trading using opposite MercadoLibre and Promotora positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MercadoLibre position performs unexpectedly, Promotora 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 Promotora will offset losses from the drop in Promotora's long position.| MercadoLibre vs. Hoteles City Express | MercadoLibre vs. Southwest Airlines | MercadoLibre vs. The Bank of | MercadoLibre vs. Genworth Financial |
| Promotora vs. Grupo Financiero Inbursa | Promotora vs. Kimberly Clark de Mxico | Promotora vs. Grupo Televisa SAB | Promotora vs. Grupo Bimbo SAB |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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