Correlation Between MercadoLibre and JD

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

Diversification Opportunities for MercadoLibre and JD

-0.68
  Correlation Coefficient

Excellent diversification

The 3 months correlation between MercadoLibre and JD is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding MercadoLibre and JD Inc Adr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Inc Adr 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 JD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Inc Adr has no effect on the direction of MercadoLibre i.e., MercadoLibre and JD go up and down completely randomly.

Pair Corralation between MercadoLibre and JD

Given the investment horizon of 90 days MercadoLibre is expected to under-perform the JD. But the stock apears to be less risky and, when comparing its historical volatility, MercadoLibre is 2.97 times less risky than JD. The stock trades about -0.15 of its potential returns per unit of risk. The JD Inc Adr is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,408  in JD Inc Adr on December 29, 2023 and sell it today you would earn a total of  315.00  from holding JD Inc Adr or generate 13.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

MercadoLibre  vs.  JD Inc Adr

 Performance 
       Timeline  
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.
JD Inc Adr 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days JD Inc Adr has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, JD is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

MercadoLibre and JD Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MercadoLibre and JD

The main advantage of trading using opposite MercadoLibre and JD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MercadoLibre position performs unexpectedly, JD 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 JD will offset losses from the drop in JD's long position.
The idea behind MercadoLibre and JD Inc Adr 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

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