Correlation Between CARSALESCOM and MercadoLibre
Can any of the company-specific risk be diversified away by investing in both CARSALESCOM 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 CARSALESCOM and MercadoLibre into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CARSALESCOM and MercadoLibre, you can compare the effects of market volatilities on CARSALESCOM 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 CARSALESCOM with a short position of MercadoLibre. Check out your portfolio center. Please also check ongoing floating volatility patterns of CARSALESCOM and MercadoLibre.
Diversification Opportunities for CARSALESCOM and MercadoLibre
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between CARSALESCOM and MercadoLibre is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding CARSALESCOM and MercadoLibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MercadoLibre and CARSALESCOM 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 CARSALESCOM 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 CARSALESCOM i.e., CARSALESCOM and MercadoLibre go up and down completely randomly.
Pair Corralation between CARSALESCOM and MercadoLibre
Assuming the 90 days trading horizon CARSALESCOM is expected to under-perform the MercadoLibre. But the stock apears to be less risky and, when comparing its historical volatility, CARSALESCOM is 1.7 times less risky than MercadoLibre. The stock trades about -0.25 of its potential returns per unit of risk. The MercadoLibre is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 177,160 in MercadoLibre on September 15, 2024 and sell it today you would lose (700.00) from holding MercadoLibre or give up 0.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CARSALESCOM vs. MercadoLibre
Performance |
| Timeline |
| CARSALESCOM |
| MercadoLibre |
CARSALESCOM and MercadoLibre Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CARSALESCOM and MercadoLibre
The main advantage of trading using opposite CARSALESCOM and MercadoLibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CARSALESCOM 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.| CARSALESCOM vs. Apple Inc | CARSALESCOM vs. Apple Inc | CARSALESCOM vs. Apple Inc | CARSALESCOM vs. Apple Inc |
| MercadoLibre vs. Superior Plus Corp | MercadoLibre vs. SIVERS SEMICONDUCTORS AB | MercadoLibre vs. NorAm Drilling AS | MercadoLibre vs. Norsk Hydro ASA |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
Other Complementary Tools
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account |