Correlation Between AGRICULTBK HADR/25 and MercadoLibre

Can any of the company-specific risk be diversified away by investing in both AGRICULTBK HADR/25 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 AGRICULTBK HADR/25 and MercadoLibre into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AGRICULTBK HADR25 YC and MercadoLibre, you can compare the effects of market volatilities on AGRICULTBK HADR/25 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 AGRICULTBK HADR/25 with a short position of MercadoLibre. Check out your portfolio center. Please also check ongoing floating volatility patterns of AGRICULTBK HADR/25 and MercadoLibre.

Diversification Opportunities for AGRICULTBK HADR/25 and MercadoLibre

-0.51

Correlation Coefficient

AGRICULTBK HADR/25  MercadoLibre

Excellent diversification

The 3 months correlation between AGRICULTBK and MercadoLibre is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding AGRICULTBK HADR25 YC and MercadoLibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MercadoLibre and AGRICULTBK HADR/25 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 AGRICULTBK HADR25 YC 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 AGRICULTBK HADR/25 i.e., AGRICULTBK HADR/25 and MercadoLibre go up and down completely randomly.

Pair Corralation between AGRICULTBK HADR/25 and MercadoLibre

Assuming the 90 days trading horizon AGRICULTBK HADR25 YC is expected to generate 0.85 times more return on investment than MercadoLibre. However, AGRICULTBK HADR25 YC is 1.18 times less risky than MercadoLibre. It trades about 0.07 of its potential returns per unit of risk. MercadoLibre is currently generating about 0.05 per unit of risk. If you would invest  655.00  in AGRICULTBK HADR25 YC on October 4, 2024 and sell it today you would earn a total of  665.00  from holding AGRICULTBK HADR25 YC or generate 101.53% return on investment over 90 days.

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

AGRICULTBK HADR25 YC  vs.  MercadoLibre

AGRICULTBK HADR/25

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AGRICULTBK HADR25 YC are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AGRICULTBK HADR/25 reported solid returns over the last few months and may actually be approaching a breakup point.

MercadoLibre

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MercadoLibre has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, MercadoLibre is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AGRICULTBK HADR/25 and MercadoLibre

The main advantage of trading using opposite AGRICULTBK HADR/25 and MercadoLibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AGRICULTBK HADR/25 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 AGRICULTBK HADR25 YC 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.