Correlation Between MercadoLibre and Overstockcom

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

By analyzing existing cross correlation between MercadoLibre and Overstockcom, you can compare the effects of market volatilities on MercadoLibre and Overstockcom 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 Overstockcom. Check out your portfolio center. Please also check ongoing floating volatility patterns of MercadoLibre and Overstockcom.

Diversification Opportunities for MercadoLibre and Overstockcom

0.0

Correlation Coefficient

MercadoLibre  Overstockcom

Pay attention - limited upside

The 3 months correlation between MercadoLibre and Overstockcom is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding MercadoLibre and Overstockcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overstockcom 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 Overstockcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overstockcom has no effect on the direction of MercadoLibre i.e., MercadoLibre and Overstockcom go up and down completely randomly.

Pair Corralation between MercadoLibre and Overstockcom

If you would invest  198,517  in MercadoLibre on November 28, 2024 and sell it today you would earn a total of  21,182  from holding MercadoLibre or generate 10.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

MercadoLibre  vs.  Overstockcom

MercadoLibre

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MercadoLibre are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady essential indicators, MercadoLibre may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Overstockcom

Risk-Adjusted Performance

Very Weak

Over the last 90 days Overstockcom has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Overstockcom is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with MercadoLibre and Overstockcom

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

The idea behind MercadoLibre and Overstockcom 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.