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
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between CarsalesCom and MercadoLibre is -0.07. 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 horizon CarsalesCom is expected to generate 1.3 times less return on investment than MercadoLibre. But when comparing it to its historical volatility, CarsalesCom is 1.72 times less risky than MercadoLibre. It trades about 0.09 of its potential returns per unit of risk. MercadoLibre is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 82,990 in MercadoLibre on September 14, 2024 and sell it today you would earn a total of 98,010 from holding MercadoLibre or generate 118.1% return on investment 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. Tencent Holdings | CarsalesCom vs. Superior Plus Corp | CarsalesCom vs. SIVERS SEMICONDUCTORS AB | CarsalesCom vs. NorAm Drilling AS |
| 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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