Correlation Between UMC Electronics and MercadoLibre
Can any of the company-specific risk be diversified away by investing in both UMC Electronics 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 UMC Electronics and MercadoLibre into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between UMC Electronics Co and MercadoLibre, you can compare the effects of market volatilities on UMC Electronics 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 UMC Electronics with a short position of MercadoLibre. Check out your portfolio center. Please also check ongoing floating volatility patterns of UMC Electronics and MercadoLibre.
Diversification Opportunities for UMC Electronics and MercadoLibre
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between UMC and MercadoLibre is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding UMC Electronics Co and MercadoLibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MercadoLibre and UMC Electronics 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 UMC Electronics Co 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 UMC Electronics i.e., UMC Electronics and MercadoLibre go up and down completely randomly.
Pair Corralation between UMC Electronics and MercadoLibre
Assuming the 90 days horizon UMC Electronics Co is expected to under-perform the MercadoLibre. But the stock apears to be less risky and, when comparing its historical volatility, UMC Electronics Co is 1.0 times less risky than MercadoLibre. The stock trades about -0.02 of its potential returns per unit of risk. The MercadoLibre is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 150,300 in MercadoLibre on September 14, 2024 and sell it today you would earn a total of 30,700 from holding MercadoLibre or generate 20.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
UMC Electronics Co vs. MercadoLibre
Performance |
| Timeline |
| UMC Electronics |
| MercadoLibre |
UMC Electronics and MercadoLibre Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UMC Electronics and MercadoLibre
The main advantage of trading using opposite UMC Electronics and MercadoLibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UMC Electronics 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.| UMC Electronics vs. Sunny Optical Technology | UMC Electronics vs. Hubbell Incorporated | UMC Electronics vs. TDK Corporation | UMC Electronics vs. Superior Plus Corp |
| MercadoLibre vs. CarsalesCom | MercadoLibre vs. Sekisui Chemical Co | MercadoLibre vs. FLOW TRADERS LTD | MercadoLibre vs. CARSALESCOM |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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