Correlation Between Grupo Carso and China Railway

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

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

Diversification Opportunities for Grupo Carso and China Railway

0.05

Correlation Coefficient

Grupo Carso  China Railway

Significant diversification

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

Pair Corralation between Grupo Carso and China Railway

Assuming the 90 days horizon Grupo Carso SAB is expected to under-perform the China Railway. But the stock apears to be less risky and, when comparing its historical volatility, Grupo Carso SAB is 2.03 times less risky than China Railway. The stock trades about -0.46 of its potential returns per unit of risk. The China Railway Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  45.00  in China Railway Group on October 6, 2024 and sell it today you would earn a total of  1.00  from holding China Railway Group or generate 2.22% return on investment over 90 days.

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

Grupo Carso SAB  vs.  China Railway Group

Grupo Carso SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Carso SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

China Railway Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Railway 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 Carso and China Railway

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

The idea behind Grupo Carso SAB and China Railway 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 Commodity Directory module to find actively traded commodities issued by global exchanges.