Correlation Between IMedia Brands and MercadoLibre

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Can any of the company-specific risk be diversified away by investing in both IMedia Brands 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 IMedia Brands and MercadoLibre into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IMedia Brands and MercadoLibre, you can compare the effects of market volatilities on IMedia Brands 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 IMedia Brands with a short position of MercadoLibre. Check out your portfolio center. Please also check ongoing floating volatility patterns of IMedia Brands and MercadoLibre.

Diversification Opportunities for IMedia Brands and MercadoLibre

0.07
  Correlation Coefficient

Significant diversification

The 3 months correlation between IMedia and MercadoLibre is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding IMedia Brands and MercadoLibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MercadoLibre and IMedia Brands 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 IMedia Brands 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 IMedia Brands i.e., IMedia Brands and MercadoLibre go up and down completely randomly.

Pair Corralation between IMedia Brands and MercadoLibre

If you would invest  0.04  in IMedia Brands on December 30, 2023 and sell it today you would earn a total of  0.00  from holding IMedia Brands or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy4.55%
ValuesDaily Returns

IMedia Brands  vs.  MercadoLibre

 Performance 
       Timeline  
IMedia Brands 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days IMedia Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, IMedia Brands is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.
MercadoLibre 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days MercadoLibre has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

IMedia Brands and MercadoLibre Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IMedia Brands and MercadoLibre

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

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