Correlation Between Sony Group and MercadoLibre
Can any of the company-specific risk be diversified away by investing in both Sony 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 Sony Group and MercadoLibre into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sony Group Corp and MercadoLibre, you can compare the effects of market volatilities on Sony 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 Sony Group with a short position of MercadoLibre. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sony Group and MercadoLibre.
Diversification Opportunities for Sony Group and MercadoLibre
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Sony and MercadoLibre is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Sony Group Corp and MercadoLibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MercadoLibre and Sony 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 Sony Group Corp 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 Sony Group i.e., Sony Group and MercadoLibre go up and down completely randomly.
Pair Corralation between Sony Group and MercadoLibre
Assuming the 90 days trading horizon Sony Group is expected to generate 2.92 times less return on investment than MercadoLibre. But when comparing it to its historical volatility, Sony Group Corp is 1.49 times less risky than MercadoLibre. It trades about 0.07 of its potential returns per unit of risk. MercadoLibre is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 172,960 in MercadoLibre on November 1, 2024 and sell it today you would earn a total of 11,780 from holding MercadoLibre or generate 6.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Sony Group Corp vs. MercadoLibre
Performance |
| Timeline |
| Sony Group Corp |
| MercadoLibre |
Sony Group and MercadoLibre Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sony Group and MercadoLibre
The main advantage of trading using opposite Sony Group and MercadoLibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sony 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.| Sony Group vs. NEWELL RUBBERMAID | Sony Group vs. Martin Marietta Materials | Sony Group vs. Heidelberg Materials AG | Sony Group vs. MHP Hotel AG |
| MercadoLibre vs. Insurance Australia Group | MercadoLibre vs. Nomad Foods | MercadoLibre vs. MOLSON RS BEVERAGE | MercadoLibre vs. PATTIES FOODS |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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