Correlation Between Technos SA and MercadoLibre
Can any of the company-specific risk be diversified away by investing in both Technos SA 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 Technos SA and MercadoLibre into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Technos SA and MercadoLibre, you can compare the effects of market volatilities on Technos SA 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 Technos SA with a short position of MercadoLibre. Check out your portfolio center. Please also check ongoing floating volatility patterns of Technos SA and MercadoLibre.
Diversification Opportunities for Technos SA and MercadoLibre
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Technos and MercadoLibre is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Technos SA and MercadoLibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MercadoLibre and Technos SA 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 Technos SA 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 Technos SA i.e., Technos SA and MercadoLibre go up and down completely randomly.
Pair Corralation between Technos SA and MercadoLibre
Assuming the 90 days trading horizon Technos SA is expected to generate 1.5 times more return on investment than MercadoLibre. However, Technos SA is 1.5 times more volatile than MercadoLibre. It trades about 0.07 of its potential returns per unit of risk. MercadoLibre is currently generating about 0.09 per unit of risk. If you would invest 350.00 in Technos SA on September 14, 2024 and sell it today you would earn a total of 199.00 from holding Technos SA or generate 56.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Technos SA vs. MercadoLibre
Performance |
| Timeline |
| Technos SA |
| MercadoLibre |
Technos SA and MercadoLibre Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Technos SA and MercadoLibre
The main advantage of trading using opposite Technos SA and MercadoLibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Technos SA 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.| Technos SA vs. Tupy SA | Technos SA vs. Engie Brasil Energia | Technos SA vs. Grendene SA | Technos SA vs. M Dias Branco |
| MercadoLibre vs. Technos SA | MercadoLibre vs. Palantir Technologies | MercadoLibre vs. Align Technology | MercadoLibre vs. Take Two Interactive Software |
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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