Correlation Between MercadoLibre and Fnac Darty

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Can any of the company-specific risk be diversified away by investing in both MercadoLibre and Fnac Darty 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 Fnac Darty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MercadoLibre and Fnac Darty SA, you can compare the effects of market volatilities on MercadoLibre and Fnac Darty 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 Fnac Darty. Check out your portfolio center. Please also check ongoing floating volatility patterns of MercadoLibre and Fnac Darty.

Diversification Opportunities for MercadoLibre and Fnac Darty

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between MercadoLibre and Fnac is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding MercadoLibre and Fnac Darty SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fnac Darty SA 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 Fnac Darty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fnac Darty SA has no effect on the direction of MercadoLibre i.e., MercadoLibre and Fnac Darty go up and down completely randomly.

Pair Corralation between MercadoLibre and Fnac Darty

If you would invest  108,560  in MercadoLibre on September 12, 2024 and sell it today you would earn a total of  71,440  from holding MercadoLibre or generate 65.81% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

MercadoLibre  vs.  Fnac Darty SA

 Performance 
       Timeline  
MercadoLibre 

Risk-Adjusted Performance

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Over the last 90 days MercadoLibre has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, MercadoLibre is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Fnac Darty SA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Weak
Over the last 90 days Fnac Darty SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Fnac Darty is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

MercadoLibre and Fnac Darty Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MercadoLibre and Fnac Darty

The main advantage of trading using opposite MercadoLibre and Fnac Darty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MercadoLibre position performs unexpectedly, Fnac Darty 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 Fnac Darty will offset losses from the drop in Fnac Darty's long position.
The idea behind MercadoLibre and Fnac Darty SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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