Correlation Between Rede DOr and MercadoLibre
Can any of the company-specific risk be diversified away by investing in both Rede DOr 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 Rede DOr and MercadoLibre into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rede DOr So and MercadoLibre, you can compare the effects of market volatilities on Rede DOr 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 Rede DOr with a short position of MercadoLibre. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rede DOr and MercadoLibre.
Diversification Opportunities for Rede DOr and MercadoLibre
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Rede and MercadoLibre is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Rede DOr So and MercadoLibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MercadoLibre and Rede DOr 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 Rede DOr So 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 Rede DOr i.e., Rede DOr and MercadoLibre go up and down completely randomly.
Pair Corralation between Rede DOr and MercadoLibre
Assuming the 90 days trading horizon Rede DOr is expected to generate 10.2 times less return on investment than MercadoLibre. In addition to that, Rede DOr is 1.02 times more volatile than MercadoLibre. It trades about 0.01 of its total potential returns per unit of risk. MercadoLibre is currently generating about 0.09 per unit of volatility. If you would invest 3,780 in MercadoLibre on September 13, 2024 and sell it today you would earn a total of 5,595 from holding MercadoLibre or generate 148.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rede DOr So vs. MercadoLibre
Performance |
| Timeline |
| Rede DOr So |
| MercadoLibre |
Rede DOr and MercadoLibre Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rede DOr and MercadoLibre
The main advantage of trading using opposite Rede DOr and MercadoLibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rede DOr 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.| Rede DOr vs. Pet Center Comrcio | Rede DOr vs. Hapvida Participaes e | Rede DOr vs. Natura Co Holding | Rede DOr vs. Banco BTG Pactual |
| MercadoLibre vs. MAHLE Metal Leve | MercadoLibre vs. Lloyds Banking Group | MercadoLibre vs. Take Two Interactive Software | MercadoLibre vs. Monster Beverage |
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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