Correlation Between Grupo México and Fortescue Metals

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

By analyzing existing cross correlation between Grupo Mxico SAB and Fortescue Metals Group, you can compare the effects of market volatilities on Grupo México and Fortescue Metals 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 Grupo México with a short position of Fortescue Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo México and Fortescue Metals.

Diversification Opportunities for Grupo México and Fortescue Metals

0.1

Correlation Coefficient

Grupo México  Fortescue Metals

Average diversification

The 3 months correlation between Grupo and Fortescue is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Mxico SAB and Fortescue Metals Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortescue Metals and Grupo México 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 Grupo Mxico SAB are associated (or correlated) with Fortescue Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortescue Metals has no effect on the direction of Grupo México i.e., Grupo México and Fortescue Metals go up and down completely randomly.

Pair Corralation between Grupo México and Fortescue Metals

Assuming the 90 days horizon Grupo Mxico SAB is expected to generate 1.0 times more return on investment than Fortescue Metals. However, Grupo México is 1.0 times more volatile than Fortescue Metals Group. It trades about -0.06 of its potential returns per unit of risk. Fortescue Metals Group is currently generating about -0.32 per unit of risk. If you would invest  504.00  in Grupo Mxico SAB on October 10, 2024 and sell it today you would lose (13.00) from holding Grupo Mxico SAB or give up 2.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

Grupo Mxico SAB  vs.  Fortescue Metals Group

Grupo Mxico SAB

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Mxico SAB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Grupo México reported solid returns over the last few months and may actually be approaching a breakup point.

Fortescue Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fortescue Metals Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Grupo México and Fortescue Metals

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

The idea behind Grupo Mxico SAB and Fortescue Metals Group 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 the Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.