Correlation Between Meituan ADR and MercadoLibre
Can any of the company-specific risk be diversified away by investing in both Meituan ADR 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 Meituan ADR and MercadoLibre into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meituan ADR and MercadoLibre, you can compare the effects of market volatilities on Meituan ADR 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 Meituan ADR with a short position of MercadoLibre. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meituan ADR and MercadoLibre.
Diversification Opportunities for Meituan ADR and MercadoLibre
-0.91 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Meituan and MercadoLibre is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Meituan ADR and MercadoLibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MercadoLibre and Meituan ADR 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 Meituan ADR 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 Meituan ADR i.e., Meituan ADR and MercadoLibre go up and down completely randomly.
Pair Corralation between Meituan ADR and MercadoLibre
Assuming the 90 days horizon Meituan ADR is expected to generate 1.73 times more return on investment than MercadoLibre. However, Meituan ADR is 1.73 times more volatile than MercadoLibre. It trades about 0.14 of its potential returns per unit of risk. MercadoLibre is currently generating about -0.12 per unit of risk. If you would invest 2,524 in Meituan ADR on February 1, 2024 and sell it today you would earn a total of 210.00 from holding Meituan ADR or generate 8.32% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Meituan ADR vs. MercadoLibre
Performance |
Timeline |
Meituan ADR |
MercadoLibre |
Meituan ADR and MercadoLibre Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Meituan ADR and MercadoLibre
The main advantage of trading using opposite Meituan ADR and MercadoLibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meituan ADR 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.Meituan ADR vs. AKA Brands Holding | Meituan ADR vs. Hour Loop | Meituan ADR vs. Etsy Inc | Meituan ADR vs. Chewy Inc |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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