Correlation Between Mercadolibre and Imedia Brands

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

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

Diversification Opportunities for Mercadolibre and Imedia Brands

-0.14
  Correlation Coefficient
Mercadolibre
Imedia Brands

Good diversification

The 3 months correlation between Mercadolibre and Imedia is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Mercadolibre and Imedia Brands in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Imedia Brands 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 Imedia Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imedia Brands has no effect on the direction of Mercadolibre i.e., Mercadolibre and Imedia Brands go up and down completely randomly.

Pair Corralation between Mercadolibre and Imedia Brands

Given the investment horizon of 90 days Mercadolibre is expected to generate 1.56 times less return on investment than Imedia Brands. But when comparing it to its historical volatility, Mercadolibre is 1.66 times less risky than Imedia Brands. It trades about 0.05 of its potential returns per unit of risk. Imedia Brands is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  388.00  in Imedia Brands on October 20, 2021 and sell it today you would earn a total of  223.00  from holding Imedia Brands or generate 57.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Mercadolibre  vs.  Imedia Brands

 Performance (%) 
      Timeline 
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 February 2022. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Mercadolibre Price Channel

Imedia Brands 
Imedia Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Imedia Brands are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, Imedia Brands may actually be approaching a critical reversion point that can send shares even higher in February 2022.

Imedia Price Channel

Mercadolibre and Imedia Brands Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Mercadolibre and Imedia Brands

The main advantage of trading using opposite Mercadolibre and Imedia Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercadolibre position performs unexpectedly, Imedia Brands 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 Imedia Brands will offset losses from the drop in Imedia Brands' long position.
The idea behind Mercadolibre and Imedia Brands 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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