Correlation Between MercadoLibre and Southern Copper
Can any of the company-specific risk be diversified away by investing in both MercadoLibre and Southern Copper 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 Southern Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MercadoLibre and Southern Copper, you can compare the effects of market volatilities on MercadoLibre and Southern Copper 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 Southern Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of MercadoLibre and Southern Copper.
Diversification Opportunities for MercadoLibre and Southern Copper
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between MercadoLibre and Southern is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding MercadoLibre and Southern Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper 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 Southern Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Copper has no effect on the direction of MercadoLibre i.e., MercadoLibre and Southern Copper go up and down completely randomly.
Pair Corralation between MercadoLibre and Southern Copper
Assuming the 90 days trading horizon MercadoLibre is expected to generate 3.1 times more return on investment than Southern Copper. However, MercadoLibre is 3.1 times more volatile than Southern Copper. It trades about 0.04 of its potential returns per unit of risk. Southern Copper is currently generating about -0.19 per unit of risk. If you would invest 4,145,860 in MercadoLibre on August 29, 2024 and sell it today you would earn a total of 55,140 from holding MercadoLibre or generate 1.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MercadoLibre vs. Southern Copper
Performance |
| Timeline |
| MercadoLibre |
| Southern Copper |
MercadoLibre and Southern Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MercadoLibre and Southern Copper
The main advantage of trading using opposite MercadoLibre and Southern Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MercadoLibre position performs unexpectedly, Southern Copper 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 Southern Copper will offset losses from the drop in Southern Copper's long position.| MercadoLibre vs. Southern Copper | MercadoLibre vs. GMxico Transportes SAB | MercadoLibre vs. Verizon Communications | MercadoLibre vs. Micron Technology |
| Southern Copper vs. Cognizant Technology Solutions | Southern Copper vs. Capital One Financial | Southern Copper vs. McEwen Mining | Southern Copper vs. Verizon Communications |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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