Correlation Between Revolve Group and MercadoLibre
Can any of the company-specific risk be diversified away by investing in both Revolve Group 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 Revolve Group and MercadoLibre into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Revolve Group LLC and MercadoLibre, you can compare the effects of market volatilities on Revolve Group 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 Revolve Group with a short position of MercadoLibre. Check out your portfolio center. Please also check ongoing floating volatility patterns of Revolve Group and MercadoLibre.
Diversification Opportunities for Revolve Group and MercadoLibre
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Revolve and MercadoLibre is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Revolve Group LLC and MercadoLibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MercadoLibre and Revolve Group 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 Revolve Group LLC 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 Revolve Group i.e., Revolve Group and MercadoLibre go up and down completely randomly.
Pair Corralation between Revolve Group and MercadoLibre
Given the investment horizon of 90 days Revolve Group LLC is expected to generate 1.88 times more return on investment than MercadoLibre. However, Revolve Group is 1.88 times more volatile than MercadoLibre. It trades about 0.12 of its potential returns per unit of risk. MercadoLibre is currently generating about 0.06 per unit of risk. If you would invest 1,900 in Revolve Group LLC on August 24, 2024 and sell it today you would earn a total of 1,582 from holding Revolve Group LLC or generate 83.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Revolve Group LLC vs. MercadoLibre
Performance |
| Timeline |
| Revolve Group LLC |
| MercadoLibre |
Revolve Group and MercadoLibre Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Revolve Group and MercadoLibre
The main advantage of trading using opposite Revolve Group and MercadoLibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Revolve Group 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.| Revolve Group vs. Sea | Revolve Group vs. MercadoLibre | Revolve Group vs. Jumia Technologies AG | Revolve Group vs. PDD Holdings |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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