Correlation Between SentinelOne and MercadoLibre
Can any of the company-specific risk be diversified away by investing in both SentinelOne 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 SentinelOne and MercadoLibre into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SentinelOne and MercadoLibre, you can compare the effects of market volatilities on SentinelOne 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 SentinelOne with a short position of MercadoLibre. Check out your portfolio center. Please also check ongoing floating volatility patterns of SentinelOne and MercadoLibre.
Diversification Opportunities for SentinelOne and MercadoLibre
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SentinelOne and MercadoLibre is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding SentinelOne and MercadoLibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MercadoLibre and SentinelOne 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 SentinelOne 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 SentinelOne i.e., SentinelOne and MercadoLibre go up and down completely randomly.
Pair Corralation between SentinelOne and MercadoLibre
Taking into account the 90-day investment horizon SentinelOne is expected to generate 1.4 times less return on investment than MercadoLibre. But when comparing it to its historical volatility, SentinelOne is 1.42 times less risky than MercadoLibre. It trades about 0.17 of its potential returns per unit of risk. MercadoLibre is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 174,980 in MercadoLibre on November 8, 2024 and sell it today you would earn a total of 15,380 from holding MercadoLibre or generate 8.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
SentinelOne vs. MercadoLibre
Performance |
| Timeline |
| SentinelOne |
| MercadoLibre |
SentinelOne and MercadoLibre Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SentinelOne and MercadoLibre
The main advantage of trading using opposite SentinelOne and MercadoLibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SentinelOne 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.| SentinelOne vs. Crowdstrike Holdings | SentinelOne vs. Okta Inc | SentinelOne vs. Cloudflare | SentinelOne vs. MongoDB |
| MercadoLibre vs. Global Ship Lease | MercadoLibre vs. TRAVEL LEISURE DL 01 | MercadoLibre vs. InPlay Oil Corp | MercadoLibre vs. United Rentals |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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