Correlation Between Visa and MercadoLibre
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and MercadoLibre into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and MercadoLibre, you can compare the effects of market volatilities on Visa 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 Visa with a short position of MercadoLibre. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and MercadoLibre.
Diversification Opportunities for Visa and MercadoLibre
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Visa and MercadoLibre is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and MercadoLibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MercadoLibre and Visa 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 Visa Class A 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 Visa i.e., Visa and MercadoLibre go up and down completely randomly.
Pair Corralation between Visa and MercadoLibre
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.38 times more return on investment than MercadoLibre. However, Visa Class A is 2.65 times less risky than MercadoLibre. It trades about 0.56 of its potential returns per unit of risk. MercadoLibre is currently generating about 0.17 per unit of risk. If you would invest 31,167 in Visa Class A on November 8, 2024 and sell it today you would earn a total of 3,581 from holding Visa Class A or generate 11.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Visa Class A vs. MercadoLibre
Performance |
| Timeline |
| Visa Class A |
| MercadoLibre |
Visa and MercadoLibre Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and MercadoLibre
The main advantage of trading using opposite Visa and MercadoLibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.| Visa vs. American Express | Visa vs. Upstart Holdings | Visa vs. Capital One Financial | Visa vs. Ally Financial |
| 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation |