Correlation Between SPDR Series and MercadoLibre
Can any of the company-specific risk be diversified away by investing in both SPDR Series 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 SPDR Series and MercadoLibre into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR Series Trust and MercadoLibre, you can compare the effects of market volatilities on SPDR Series 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 SPDR Series with a short position of MercadoLibre. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Series and MercadoLibre.
Diversification Opportunities for SPDR Series and MercadoLibre
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between SPDR and MercadoLibre is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Series Trust and MercadoLibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MercadoLibre and SPDR Series 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 SPDR Series Trust 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 SPDR Series i.e., SPDR Series and MercadoLibre go up and down completely randomly.
Pair Corralation between SPDR Series and MercadoLibre
Assuming the 90 days trading horizon SPDR Series Trust is expected to generate 0.78 times more return on investment than MercadoLibre. However, SPDR Series Trust is 1.28 times less risky than MercadoLibre. It trades about -0.07 of its potential returns per unit of risk. MercadoLibre is currently generating about -0.09 per unit of risk. If you would invest 286,000 in SPDR Series Trust on September 18, 2024 and sell it today you would lose (8,019) from holding SPDR Series Trust or give up 2.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
SPDR Series Trust vs. MercadoLibre
Performance |
| Timeline |
| SPDR Series Trust |
| MercadoLibre |
SPDR Series and MercadoLibre Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR Series and MercadoLibre
The main advantage of trading using opposite SPDR Series and MercadoLibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Series 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.| SPDR Series vs. Vanguard Index Funds | SPDR Series vs. Vanguard Index Funds | SPDR Series vs. SPDR SP 500 | SPDR Series vs. Vanguard Bond Index |
| MercadoLibre vs. First Republic Bank | MercadoLibre vs. FIBRA Storage | MercadoLibre vs. McEwen Mining | MercadoLibre vs. First Majestic Silver |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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