Correlation Between McEwen Mining and MercadoLibre
Can any of the company-specific risk be diversified away by investing in both McEwen Mining 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 McEwen Mining and MercadoLibre into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McEwen Mining and MercadoLibre, you can compare the effects of market volatilities on McEwen Mining 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 McEwen Mining with a short position of MercadoLibre. Check out your portfolio center. Please also check ongoing floating volatility patterns of McEwen Mining and MercadoLibre.
Diversification Opportunities for McEwen Mining and MercadoLibre
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between McEwen and MercadoLibre is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding McEwen Mining and MercadoLibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MercadoLibre and McEwen Mining 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 McEwen Mining 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 McEwen Mining i.e., McEwen Mining and MercadoLibre go up and down completely randomly.
Pair Corralation between McEwen Mining and MercadoLibre
Assuming the 90 days trading horizon McEwen Mining is expected to generate 3.86 times more return on investment than MercadoLibre. However, McEwen Mining is 3.86 times more volatile than MercadoLibre. It trades about 0.1 of its potential returns per unit of risk. MercadoLibre is currently generating about 0.11 per unit of risk. If you would invest 7,500 in McEwen Mining on August 30, 2024 and sell it today you would earn a total of 12,300 from holding McEwen Mining or generate 164.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
McEwen Mining vs. MercadoLibre
Performance |
| Timeline |
| McEwen Mining |
| MercadoLibre |
McEwen Mining and MercadoLibre Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McEwen Mining and MercadoLibre
The main advantage of trading using opposite McEwen Mining and MercadoLibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McEwen Mining 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.| McEwen Mining vs. The Select Sector | McEwen Mining vs. SPDR Series Trust | McEwen Mining vs. FibroGen | McEwen Mining vs. iShares Trust |
| MercadoLibre vs. Cognizant Technology Solutions | MercadoLibre vs. Verizon Communications | MercadoLibre vs. McEwen Mining | MercadoLibre vs. DXC 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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