Correlation Between BANKINTER ADR and MercadoLibre

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

By analyzing existing cross correlation between BANKINTER ADR 2007 and MercadoLibre, you can compare the effects of market volatilities on BANKINTER ADR 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 BANKINTER ADR with a short position of MercadoLibre. Check out your portfolio center. Please also check ongoing floating volatility patterns of BANKINTER ADR and MercadoLibre.

Diversification Opportunities for BANKINTER ADR and MercadoLibre

0.78

Correlation Coefficient

BANKINTER ADR  MercadoLibre

Poor diversification

The 3 months correlation between BANKINTER and MercadoLibre is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding BANKINTER ADR 2007 and MercadoLibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MercadoLibre and BANKINTER ADR 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 BANKINTER ADR 2007 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 BANKINTER ADR i.e., BANKINTER ADR and MercadoLibre go up and down completely randomly.

Pair Corralation between BANKINTER ADR and MercadoLibre

Assuming the 90 days horizon BANKINTER ADR 2007 is expected to generate 0.67 times more return on investment than MercadoLibre. However, BANKINTER ADR 2007 is 1.49 times less risky than MercadoLibre. It trades about 0.26 of its potential returns per unit of risk. MercadoLibre is currently generating about 0.07 per unit of risk. If you would invest  684.00  in BANKINTER ADR 2007 on December 2, 2024 and sell it today you would earn a total of  206.00  from holding BANKINTER ADR 2007 or generate 30.12% return on investment over 90 days.

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

BANKINTER ADR 2007  vs.  MercadoLibre

BANKINTER ADR 2007

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BANKINTER ADR 2007 are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BANKINTER ADR 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 BANKINTER ADR and MercadoLibre

The main advantage of trading using opposite BANKINTER ADR and MercadoLibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BANKINTER ADR 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 BANKINTER ADR 2007 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.