Correlation Between Vanguard World and MercadoLibre
Can any of the company-specific risk be diversified away by investing in both Vanguard World 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 Vanguard World and MercadoLibre into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard World and MercadoLibre, you can compare the effects of market volatilities on Vanguard World 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 Vanguard World with a short position of MercadoLibre. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard World and MercadoLibre.
Diversification Opportunities for Vanguard World and MercadoLibre
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Vanguard and MercadoLibre is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard World and MercadoLibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MercadoLibre and Vanguard World 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 Vanguard World 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 Vanguard World i.e., Vanguard World and MercadoLibre go up and down completely randomly.
Pair Corralation between Vanguard World and MercadoLibre
Assuming the 90 days trading horizon Vanguard World is expected to generate 1.27 times less return on investment than MercadoLibre. But when comparing it to its historical volatility, Vanguard World is 3.53 times less risky than MercadoLibre. It trades about 0.05 of its potential returns per unit of risk. MercadoLibre is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 4,092,123 in MercadoLibre on August 25, 2024 and sell it today you would earn a total of 4,446 from holding MercadoLibre or generate 0.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
Vanguard World vs. MercadoLibre
Performance |
| Timeline |
| Vanguard World |
| MercadoLibre |
Vanguard World and MercadoLibre Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard World and MercadoLibre
The main advantage of trading using opposite Vanguard World and MercadoLibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard World 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.| Vanguard World vs. Vanguard Index Funds | Vanguard World vs. Vanguard Index Funds | Vanguard World vs. SPDR SP 500 | Vanguard World vs. iShares Trust |
| MercadoLibre vs. Hoteles City Express | MercadoLibre vs. Southwest Airlines | MercadoLibre vs. The Bank of | MercadoLibre vs. Genworth Financial |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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