Correlation Between Xtrackers ShortDAX and MercadoLibre

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

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

Diversification Opportunities for Xtrackers ShortDAX and MercadoLibre

-0.65

Correlation Coefficient

Xtrackers ShortDAX  MercadoLibre

Excellent diversification

The 3 months correlation between Xtrackers and MercadoLibre is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX and MercadoLibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MercadoLibre and Xtrackers ShortDAX 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 Xtrackers ShortDAX 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 Xtrackers ShortDAX i.e., Xtrackers ShortDAX and MercadoLibre go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and MercadoLibre

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to under-perform the MercadoLibre. But the etf apears to be less risky and, when comparing its historical volatility, Xtrackers ShortDAX is 1.42 times less risky than MercadoLibre. The etf trades about -0.15 of its potential returns per unit of risk. The MercadoLibre is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  194,360  in MercadoLibre on April 24, 2025 and sell it today you would earn a total of  12,240  from holding MercadoLibre or generate 6.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Xtrackers ShortDAX  vs.  MercadoLibre

Xtrackers ShortDAX

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xtrackers ShortDAX has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Etf's basic indicators remain nearly stable which may send shares a bit higher in August 2025. The current disturbance may also be a sign of long-run up-swing for the Exchange Traded Fund stockholders.

MercadoLibre

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MercadoLibre are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, MercadoLibre may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Xtrackers ShortDAX and MercadoLibre

The main advantage of trading using opposite Xtrackers ShortDAX and MercadoLibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers ShortDAX 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 Xtrackers ShortDAX 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.