Correlation Between Micron Technology and MercadoLibre
Can any of the company-specific risk be diversified away by investing in both Micron Technology and MercadoLibre 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 Micron Technology and MercadoLibre into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology and MercadoLibre, you can compare the effects of market volatilities on Micron Technology and MercadoLibre 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 Micron Technology with a short position of MercadoLibre. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and MercadoLibre.
Diversification Opportunities for Micron Technology and MercadoLibre
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Micron and MercadoLibre is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and MercadoLibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MercadoLibre and Micron Technology 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 Micron Technology are associated (or correlated) with MercadoLibre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MercadoLibre has no effect on the direction of Micron Technology i.e., Micron Technology and MercadoLibre go up and down completely randomly.
Pair Corralation between Micron Technology and MercadoLibre
Assuming the 90 days horizon Micron Technology is expected to under-perform the MercadoLibre. But the stock apears to be less risky and, when comparing its historical volatility, Micron Technology is 1.59 times less risky than MercadoLibre. The stock trades about -0.02 of its potential returns per unit of risk. The MercadoLibre is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 4,145,860 in MercadoLibre on August 29, 2024 and sell it today you would earn a total of 154,141 from holding MercadoLibre or generate 3.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Micron Technology vs. MercadoLibre
Performance |
| Timeline |
| Micron Technology |
| MercadoLibre |
Micron Technology and MercadoLibre Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Micron Technology and MercadoLibre
The main advantage of trading using opposite Micron Technology and MercadoLibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, MercadoLibre 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 MercadoLibre will offset losses from the drop in MercadoLibre's long position.| Micron Technology vs. Deutsche Bank Aktiengesellschaft | Micron Technology vs. Capital One Financial | Micron Technology vs. Grupo Sports World | Micron Technology vs. Prudential Financial |
| MercadoLibre vs. Southern Copper | MercadoLibre vs. GMxico Transportes SAB | MercadoLibre vs. Verizon Communications | MercadoLibre vs. Micron Technology |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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