Correlation Between COMINTL BANK and MercadoLibre

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

By analyzing existing cross correlation between COMINTL BANK ADR1 and MercadoLibre, you can compare the effects of market volatilities on COMINTL BANK 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 COMINTL BANK with a short position of MercadoLibre. Check out your portfolio center. Please also check ongoing floating volatility patterns of COMINTL BANK and MercadoLibre.

Diversification Opportunities for COMINTL BANK and MercadoLibre

-0.12

Correlation Coefficient

COMINTL BANK  MercadoLibre

Good diversification

The 3 months correlation between COMINTL and MercadoLibre is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding COMINTL BANK ADR1 and MercadoLibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MercadoLibre and COMINTL BANK 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 COMINTL BANK ADR1 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 COMINTL BANK i.e., COMINTL BANK and MercadoLibre go up and down completely randomly.

Pair Corralation between COMINTL BANK and MercadoLibre

Assuming the 90 days trading horizon COMINTL BANK is expected to generate 2.74 times less return on investment than MercadoLibre. But when comparing it to its historical volatility, COMINTL BANK ADR1 is 1.48 times less risky than MercadoLibre. It trades about 0.04 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  185,500  in MercadoLibre on December 2, 2024 and sell it today you would earn a total of  17,900  from holding MercadoLibre or generate 9.65% return on investment over 90 days.

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

COMINTL BANK ADR1  vs.  MercadoLibre

COMINTL BANK ADR1

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in COMINTL BANK ADR1 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, COMINTL BANK is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 COMINTL BANK and MercadoLibre

The main advantage of trading using opposite COMINTL BANK and MercadoLibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COMINTL BANK 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 COMINTL BANK ADR1 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.

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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.