Correlation Between VTEX and Meridianlink

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

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

Diversification Opportunities for VTEX and Meridianlink

0.05

Correlation Coefficient

VTEX  Meridianlink

Significant diversification

The 3 months correlation between VTEX and Meridianlink is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding VTEX and Meridianlink in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meridianlink and VTEX 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 VTEX are associated (or correlated) with Meridianlink. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meridianlink has no effect on the direction of VTEX i.e., VTEX and Meridianlink go up and down completely randomly.

Pair Corralation between VTEX and Meridianlink

Given the investment horizon of 90 days VTEX is expected to generate 1.36 times more return on investment than Meridianlink. However, VTEX is 1.36 times more volatile than Meridianlink. It trades about -0.01 of its potential returns per unit of risk. Meridianlink is currently generating about -0.14 per unit of risk. If you would invest  800.00  in VTEX on February 4, 2024 and sell it today you would lose (10.00) from holding VTEX or give up 1.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

VTEX  vs.  Meridianlink

VTEX

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VTEX are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, VTEX is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Meridianlink

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Meridianlink has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with VTEX and Meridianlink

The main advantage of trading using opposite VTEX and Meridianlink positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VTEX position performs unexpectedly, Meridianlink 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 Meridianlink will offset losses from the drop in Meridianlink's long position.

The idea behind VTEX and Meridianlink 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.