Correlation Between MercadoLibre and Select Sector
Can any of the company-specific risk be diversified away by investing in both MercadoLibre and Select Sector 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 Select Sector into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MercadoLibre and The Select Sector, you can compare the effects of market volatilities on MercadoLibre and Select Sector 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 Select Sector. Check out your portfolio center. Please also check ongoing floating volatility patterns of MercadoLibre and Select Sector.
Diversification Opportunities for MercadoLibre and Select Sector
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between MercadoLibre and Select is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding MercadoLibre and The Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Sector 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 Select Sector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Sector has no effect on the direction of MercadoLibre i.e., MercadoLibre and Select Sector go up and down completely randomly.
Pair Corralation between MercadoLibre and Select Sector
Assuming the 90 days trading horizon MercadoLibre is expected to generate 3.26 times less return on investment than Select Sector. In addition to that, MercadoLibre is 1.66 times more volatile than The Select Sector. It trades about 0.02 of its total potential returns per unit of risk. The Select Sector is currently generating about 0.1 per unit of volatility. If you would invest 154,720 in The Select Sector on August 25, 2024 and sell it today you would earn a total of 12,756 from holding The Select Sector or generate 8.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MercadoLibre vs. The Select Sector
Performance |
| Timeline |
| MercadoLibre |
| Select Sector |
MercadoLibre and Select Sector Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MercadoLibre and Select Sector
The main advantage of trading using opposite MercadoLibre and Select Sector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MercadoLibre position performs unexpectedly, Select Sector 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 Select Sector will offset losses from the drop in Select Sector's long position.| MercadoLibre vs. Hoteles City Express | MercadoLibre vs. Southwest Airlines | MercadoLibre vs. The Bank of | MercadoLibre vs. Genworth Financial |
| Select Sector vs. Vanguard Index Funds | Select Sector vs. Vanguard Index Funds | Select Sector vs. SPDR SP 500 | Select Sector vs. iShares Trust |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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