Correlation Between ATT and Mercadolibre

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Can any of the company-specific risk be diversified away by investing in both ATT 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 ATT and Mercadolibre into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ATT Inc and Mercadolibre, you can compare the effects of market volatilities on ATT 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 ATT with a short position of Mercadolibre. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and Mercadolibre.

Diversification Opportunities for ATT and Mercadolibre

-0.6
  Correlation Coefficient

Excellent diversification

The 3 months correlation between ATT and Mercadolibre is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Mercadolibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercadolibre and ATT 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 ATT 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 ATT i.e., ATT and Mercadolibre go up and down completely randomly.

Pair Corralation between ATT and Mercadolibre

Taking into account the 90-day investment horizon ATT Inc is expected to under-perform the Mercadolibre. But the stock apears to be less risky and, when comparing its historical volatility, ATT Inc is 2.63 times less risky than Mercadolibre. The stock trades about -0.43 of its potential returns per unit of risk. The Mercadolibre is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  85,536  in Mercadolibre on July 2, 2022 and sell it today you would lose (2,568)  from holding Mercadolibre or give up 3.0% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy95.45%
ValuesDaily Returns

ATT Inc  vs.  Mercadolibre

 Performance (%) 
       Timeline  
ATT Inc 
ATT Performance
0 of 100
Over the last 90 days ATT Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in October 2022. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

ATT Price Channel

Mercadolibre 
Mercadolibre Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Mercadolibre are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting essential indicators, Mercadolibre reported solid returns over the last few months and may actually be approaching a breakup point.

Mercadolibre Price Channel

ATT and Mercadolibre Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ATT and Mercadolibre

The main advantage of trading using opposite ATT and Mercadolibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT 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.
ATT vs. Amazon Inc
The idea behind ATT 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.
Mercadolibre vs. Amazon Inc
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 Stock Screener module to find equities using custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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