Correlation Between Tuniu Corp and MercadoLibre

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

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

Diversification Opportunities for Tuniu Corp and MercadoLibre

-0.36

Correlation Coefficient

Tuniu Corp  MercadoLibre

Very good diversification

The 3 months correlation between Tuniu and MercadoLibre is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Tuniu Corp and MercadoLibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MercadoLibre and Tuniu Corp 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 Tuniu Corp 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 Tuniu Corp i.e., Tuniu Corp and MercadoLibre go up and down completely randomly.

Pair Corralation between Tuniu Corp and MercadoLibre

Given the investment horizon of 90 days Tuniu Corp is expected to generate 2.35 times more return on investment than MercadoLibre. However, Tuniu Corp is 2.35 times more volatile than MercadoLibre. It trades about 0.21 of its potential returns per unit of risk. MercadoLibre is currently generating about 0.38 per unit of risk. If you would invest  75.00  in Tuniu Corp on February 14, 2024 and sell it today you would earn a total of  18.00  from holding Tuniu Corp or generate 24.0% return on investment over 90 days.

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

Tuniu Corp  vs.  MercadoLibre

Tuniu Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tuniu Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Tuniu Corp reported solid returns over the last few months and may actually be approaching a breakup point.

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 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 Tuniu Corp and MercadoLibre

The main advantage of trading using opposite Tuniu Corp and MercadoLibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tuniu Corp 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 Tuniu Corp 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.