Correlation Between MercadoLibre and Genuine Parts
Can any of the company-specific risk be diversified away by investing in both MercadoLibre and Genuine Parts 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 Genuine Parts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MercadoLibre and Genuine Parts, you can compare the effects of market volatilities on MercadoLibre and Genuine Parts 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 Genuine Parts. Check out your portfolio center. Please also check ongoing floating volatility patterns of MercadoLibre and Genuine Parts.
Diversification Opportunities for MercadoLibre and Genuine Parts
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between MercadoLibre and Genuine is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding MercadoLibre and Genuine Parts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genuine Parts 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 Genuine Parts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genuine Parts has no effect on the direction of MercadoLibre i.e., MercadoLibre and Genuine Parts go up and down completely randomly.
Pair Corralation between MercadoLibre and Genuine Parts
Assuming the 90 days trading horizon MercadoLibre is expected to generate 6.02 times less return on investment than Genuine Parts. In addition to that, MercadoLibre is 2.02 times more volatile than Genuine Parts. It trades about 0.02 of its total potential returns per unit of risk. Genuine Parts is currently generating about 0.3 per unit of volatility. If you would invest 10,425 in Genuine Parts on September 2, 2024 and sell it today you would earn a total of 1,580 from holding Genuine Parts or generate 15.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MercadoLibre vs. Genuine Parts
Performance |
| Timeline |
| MercadoLibre |
| Genuine Parts |
MercadoLibre and Genuine Parts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MercadoLibre and Genuine Parts
The main advantage of trading using opposite MercadoLibre and Genuine Parts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MercadoLibre position performs unexpectedly, Genuine Parts 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 Genuine Parts will offset losses from the drop in Genuine Parts' long position.| MercadoLibre vs. AutoZone | MercadoLibre vs. Superior Plus Corp | MercadoLibre vs. NMI Holdings | MercadoLibre vs. Origin Agritech |
| Genuine Parts vs. MercadoLibre | Genuine Parts vs. AutoZone | Genuine Parts vs. Superior Plus Corp | Genuine Parts vs. NMI Holdings |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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