Correlation Between Vertex Energy and Mercadolibre

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

Diversification Opportunities for Vertex Energy and Mercadolibre

-0.28
  Correlation Coefficient

Very good diversification

The 3 months correlation between Vertex and Mercadolibre is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Vertex Energy and Mercadolibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercadolibre and Vertex Energy 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 Vertex Energy 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 Vertex Energy i.e., Vertex Energy and Mercadolibre go up and down completely randomly.

Pair Corralation between Vertex Energy and Mercadolibre

Given the investment horizon of 90 days Vertex Energy is expected to under-perform the Mercadolibre. In addition to that, Vertex Energy is 1.54 times more volatile than Mercadolibre. It trades about -0.07 of its total potential returns per unit of risk. Mercadolibre is currently generating about 0.1 per unit of volatility. If you would invest  77,565  in Mercadolibre on May 20, 2022 and sell it today you would earn a total of  20,187  from holding Mercadolibre or generate 26.03% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Vertex Energy  vs.  Mercadolibre

 Performance (%) 
       Timeline  
Vertex Energy 
Vertex Performance
0 of 100
Over the last 90 days Vertex Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in September 2022. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Vertex Price Channel

Mercadolibre 
Mercadolibre Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Mercadolibre are ranked lower than 7 (%) 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

Vertex Energy and Mercadolibre Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vertex Energy and Mercadolibre

The main advantage of trading using opposite Vertex Energy and Mercadolibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vertex Energy 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.

Vertex Energy

Pair trading matchups for Vertex Energy

The idea behind Vertex Energy 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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