Correlation Between EBay and Mercadolibre

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

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

Diversification Opportunities for EBay and Mercadolibre

0.24
  Correlation Coefficient
EBay Inc
Mercadolibre

Modest diversification

The 3 months correlation between EBay and Mercadolibre is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding EBay Inc and Mercadolibre in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Mercadolibre and EBay 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 EBay Inc 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 EBay i.e., EBay and Mercadolibre go up and down completely randomly.

Pair Corralation between EBay and Mercadolibre

Given the investment horizon of 90 days EBay Inc is expected to generate 0.78 times more return on investment than Mercadolibre. However, EBay Inc is 1.29 times less risky than Mercadolibre. It trades about 0.07 of its potential returns per unit of risk. Mercadolibre is currently generating about -0.04 per unit of risk. If you would invest  5,333  in EBay Inc on September 4, 2021 and sell it today you would earn a total of  1,372  from holding EBay Inc or generate 25.73% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

EBay Inc  vs.  Mercadolibre

 Performance (%) 
      Timeline 
EBay Inc 
EBay Performance
0 of 100
Over the last 90 days EBay Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

EBay Price Channel

Mercadolibre 
Mercadolibre Performance
0 of 100
Over the last 90 days Mercadolibre has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in January 2022. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Mercadolibre Price Channel

EBay and Mercadolibre Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with EBay and Mercadolibre

The main advantage of trading using opposite EBay and Mercadolibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EBay 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 EBay Inc 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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