Correlation Between Dave and GMéxico Transportes

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

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

Diversification Opportunities for Dave and GMéxico Transportes

0.88

Correlation Coefficient

Dave  GMéxico Transportes

Very poor diversification

The 3 months correlation between Dave and GMéxico is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Dave Inc and GMxico Transportes SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMxico Transportes SAB and Dave 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 Dave Inc are associated (or correlated) with GMéxico Transportes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMxico Transportes SAB has no effect on the direction of Dave i.e., Dave and GMéxico Transportes go up and down completely randomly.

Pair Corralation between Dave and GMéxico Transportes

Given the investment horizon of 90 days Dave Inc is expected to generate 4.64 times more return on investment than GMéxico Transportes. However, Dave is 4.64 times more volatile than GMxico Transportes SAB. It trades about -0.04 of its potential returns per unit of risk. GMxico Transportes SAB is currently generating about -0.22 per unit of risk. If you would invest  9,669  in Dave Inc on October 25, 2024 and sell it today you would lose (413.00) from holding Dave Inc or give up 4.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	90.48%
Values	Daily Returns

Dave Inc  vs.  GMxico Transportes SAB

Dave Inc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dave Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Dave exhibited solid returns over the last few months and may actually be approaching a breakup point.

GMxico Transportes SAB

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GMxico Transportes SAB are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, GMéxico Transportes reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dave and GMéxico Transportes

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

The idea behind Dave Inc and GMxico Transportes SAB 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.