Correlation Between ANTA SPORTS and MercadoLibre

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

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

Diversification Opportunities for ANTA SPORTS and MercadoLibre

-0.32

Correlation Coefficient

ANTA SPORTS  MercadoLibre

Very good diversification

The 3 months correlation between ANTA and MercadoLibre is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding ANTA SPORTS PRODUCT and MercadoLibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MercadoLibre and ANTA SPORTS 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 ANTA SPORTS PRODUCT 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 ANTA SPORTS i.e., ANTA SPORTS and MercadoLibre go up and down completely randomly.

Pair Corralation between ANTA SPORTS and MercadoLibre

Assuming the 90 days trading horizon ANTA SPORTS is expected to generate 2.23 times less return on investment than MercadoLibre. In addition to that, ANTA SPORTS is 1.07 times more volatile than MercadoLibre. It trades about 0.03 of its total potential returns per unit of risk. MercadoLibre is currently generating about 0.07 per unit of volatility. If you would invest  80,500  in MercadoLibre on September 13, 2024 and sell it today you would earn a total of  96,780  from holding MercadoLibre or generate 120.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

ANTA SPORTS PRODUCT  vs.  MercadoLibre

ANTA SPORTS PRODUCT

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ANTA SPORTS PRODUCT are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, ANTA SPORTS exhibited 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 nearly stable fundamental drivers, MercadoLibre is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ANTA SPORTS and MercadoLibre

The main advantage of trading using opposite ANTA SPORTS and MercadoLibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ANTA SPORTS 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 ANTA SPORTS PRODUCT 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.