Correlation Between Capital One and Grupo Mexicano

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

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

Diversification Opportunities for Capital One and Grupo Mexicano

0.44

Correlation Coefficient

Capital One  Grupo Mexicano

Very weak diversification

The 3 months correlation between Capital and Grupo is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Grupo Mexicano de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Mexicano de and Capital One 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 Capital One Financial are associated (or correlated) with Grupo Mexicano. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Mexicano de has no effect on the direction of Capital One i.e., Capital One and Grupo Mexicano go up and down completely randomly.

Pair Corralation between Capital One and Grupo Mexicano

Assuming the 90 days trading horizon Capital One Financial is expected to under-perform the Grupo Mexicano. In addition to that, Capital One is 4.84 times more volatile than Grupo Mexicano de. It trades about -0.09 of its total potential returns per unit of risk. Grupo Mexicano de is currently generating about -0.17 per unit of volatility. If you would invest  1,049  in Grupo Mexicano de on December 20, 2024 and sell it today you would lose (49.00) from holding Grupo Mexicano de or give up 4.67% of portfolio value over 90 days.

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

Capital One Financial  vs.  Grupo Mexicano de

Capital One Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capital One Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Grupo Mexicano de

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grupo Mexicano de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Grupo Mexicano is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Capital One and Grupo Mexicano

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

The idea behind Capital One Financial and Grupo Mexicano de 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 Global Correlations module to find global opportunities by holding instruments from different markets.