Correlation Between MercadoLibre and Tractor Supply
Can any of the company-specific risk be diversified away by investing in both MercadoLibre and Tractor Supply 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 Tractor Supply into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MercadoLibre and Tractor Supply, you can compare the effects of market volatilities on MercadoLibre and Tractor Supply 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 Tractor Supply. Check out your portfolio center. Please also check ongoing floating volatility patterns of MercadoLibre and Tractor Supply.
Diversification Opportunities for MercadoLibre and Tractor Supply
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between MercadoLibre and Tractor is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding MercadoLibre and Tractor Supply in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tractor Supply 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 Tractor Supply. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tractor Supply has no effect on the direction of MercadoLibre i.e., MercadoLibre and Tractor Supply go up and down completely randomly.
Pair Corralation between MercadoLibre and Tractor Supply
Assuming the 90 days trading horizon MercadoLibre is expected to under-perform the Tractor Supply. In addition to that, MercadoLibre is 1.53 times more volatile than Tractor Supply. It trades about -0.38 of its total potential returns per unit of risk. Tractor Supply is currently generating about -0.12 per unit of volatility. If you would invest 5,353 in Tractor Supply on September 24, 2024 and sell it today you would lose (213.00) from holding Tractor Supply or give up 3.98% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MercadoLibre vs. Tractor Supply
Performance |
| Timeline |
| MercadoLibre |
| Tractor Supply |
MercadoLibre and Tractor Supply Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MercadoLibre and Tractor Supply
The main advantage of trading using opposite MercadoLibre and Tractor Supply positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MercadoLibre position performs unexpectedly, Tractor Supply 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 Tractor Supply will offset losses from the drop in Tractor Supply's long position.| MercadoLibre vs. OReilly Automotive | MercadoLibre vs. AutoZone | MercadoLibre vs. Tractor Supply | MercadoLibre vs. Ulta Beauty |
| Tractor Supply vs. MercadoLibre | Tractor Supply vs. OReilly Automotive | Tractor Supply vs. AutoZone | Tractor Supply vs. Ulta Beauty |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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