Correlation Between MercadoLibre and Mizuno

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

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

Diversification Opportunities for MercadoLibre and Mizuno

-0.24

Correlation Coefficient

MercadoLibre  Mizuno

Very good diversification

The 3 months correlation between MercadoLibre and Mizuno is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding MercadoLibre and Mizuno in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mizuno 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 Mizuno. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mizuno has no effect on the direction of MercadoLibre i.e., MercadoLibre and Mizuno go up and down completely randomly.

Pair Corralation between MercadoLibre and Mizuno

Assuming the 90 days trading horizon MercadoLibre is expected to under-perform the Mizuno. In addition to that, MercadoLibre is 1.15 times more volatile than Mizuno. It trades about -0.06 of its total potential returns per unit of risk. Mizuno is currently generating about 0.02 per unit of volatility. If you would invest  5,550  in Mizuno on September 22, 2024 and sell it today you would earn a total of  50.00  from holding Mizuno or generate 0.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

MercadoLibre  vs.  Mizuno

MercadoLibre

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MercadoLibre has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Mizuno

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mizuno are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Mizuno is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MercadoLibre and Mizuno

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

The idea behind MercadoLibre and Mizuno 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.