Correlation Between Qurate Retail and MercadoLibre

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

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

Diversification Opportunities for Qurate Retail and MercadoLibre

0.44

Correlation Coefficient

Qurate Retail  MercadoLibre

Very weak diversification

The 3 months correlation between Qurate and MercadoLibre is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Qurate Retail Series and MercadoLibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MercadoLibre and Qurate Retail 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 Qurate Retail Series 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 Qurate Retail i.e., Qurate Retail and MercadoLibre go up and down completely randomly.

Pair Corralation between Qurate Retail and MercadoLibre

Assuming the 90 days horizon Qurate Retail Series is expected to under-perform the MercadoLibre. In addition to that, Qurate Retail is 1.69 times more volatile than MercadoLibre. It trades about -0.07 of its total potential returns per unit of risk. MercadoLibre is currently generating about 0.03 per unit of volatility. If you would invest  199,017  in MercadoLibre on August 31, 2024 and sell it today you would earn a total of  5,310  from holding MercadoLibre or generate 2.67% return on investment over 90 days.

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

Qurate Retail Series  vs.  MercadoLibre

Qurate Retail Series

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Qurate Retail Series has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

MercadoLibre

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MercadoLibre are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Qurate Retail and MercadoLibre

The main advantage of trading using opposite Qurate Retail and MercadoLibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Qurate Retail 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 Qurate Retail Series 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.