Correlation Between Gaztransport Technigaz and MercadoLibre

Can any of the company-specific risk be diversified away by investing in both Gaztransport Technigaz 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 Gaztransport Technigaz and MercadoLibre into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gaztransport Technigaz SA and MercadoLibre, you can compare the effects of market volatilities on Gaztransport Technigaz 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 Gaztransport Technigaz with a short position of MercadoLibre. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gaztransport Technigaz and MercadoLibre.

Diversification Opportunities for Gaztransport Technigaz and MercadoLibre

0.46

Correlation Coefficient

Gaztransport Technigaz  MercadoLibre

Very weak diversification

The 3 months correlation between Gaztransport and MercadoLibre is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Gaztransport Technigaz SA and MercadoLibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MercadoLibre and Gaztransport Technigaz 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 Gaztransport Technigaz SA 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 Gaztransport Technigaz i.e., Gaztransport Technigaz and MercadoLibre go up and down completely randomly.

Pair Corralation between Gaztransport Technigaz and MercadoLibre

Assuming the 90 days horizon Gaztransport Technigaz is expected to generate 1.16 times less return on investment than MercadoLibre. In addition to that, Gaztransport Technigaz is 1.16 times more volatile than MercadoLibre. It trades about 0.12 of its total potential returns per unit of risk. MercadoLibre is currently generating about 0.16 per unit of volatility. If you would invest  172,960  in MercadoLibre on December 2, 2024 and sell it today you would earn a total of  30,440  from holding MercadoLibre or generate 17.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Gaztransport Technigaz SA  vs.  MercadoLibre

Gaztransport Technigaz

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gaztransport Technigaz SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Gaztransport Technigaz reported solid returns over the last few months and may actually be approaching a breakup point.

MercadoLibre

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MercadoLibre are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, MercadoLibre may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Gaztransport Technigaz and MercadoLibre

The main advantage of trading using opposite Gaztransport Technigaz and MercadoLibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gaztransport Technigaz 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.

The idea behind Gaztransport Technigaz SA and MercadoLibre pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.