Correlation Between MercadoLibre and Global E

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

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

Diversification Opportunities for MercadoLibre and Global E

-0.13

Correlation Coefficient

MercadoLibre  Global E

Good diversification

The 3 months correlation between MercadoLibre and Global is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding MercadoLibre and Global E Online in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global E Online and MercadoLibre 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 MercadoLibre are associated (or correlated) with Global E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global E Online has no effect on the direction of MercadoLibre i.e., MercadoLibre and Global E go up and down completely randomly.

Pair Corralation between MercadoLibre and Global E

Given the investment horizon of 90 days MercadoLibre is expected to generate 19.95 times less return on investment than Global E. In addition to that, MercadoLibre is 1.15 times more volatile than Global E Online. It trades about 0.01 of its total potential returns per unit of risk. Global E Online is currently generating about 0.3 per unit of volatility. If you would invest  3,324  in Global E Online on September 1, 2024 and sell it today you would earn a total of  1,904  from holding Global E Online or generate 57.28% return on investment over 90 days.

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

MercadoLibre  vs.  Global E Online

MercadoLibre

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MercadoLibre are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong essential indicators, MercadoLibre is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Global E Online

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global E Online are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Global E exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MercadoLibre and Global E

The main advantage of trading using opposite MercadoLibre and Global E positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MercadoLibre position performs unexpectedly, Global E 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 Global E will offset losses from the drop in Global E's long position.

The idea behind MercadoLibre and Global E Online 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.