Correlation Between Grupo Carso and Xiaomi

Can any of the company-specific risk be diversified away by investing in both Grupo Carso and Xiaomi 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 Xiaomi 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 Xiaomi, you can compare the effects of market volatilities on Grupo Carso and Xiaomi 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 Xiaomi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo Carso and Xiaomi.

Diversification Opportunities for Grupo Carso and Xiaomi

0.3

Correlation Coefficient

Grupo Carso  Xiaomi

Weak diversification

The 3 months correlation between Grupo and Xiaomi is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Carso SAB and Xiaomi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiaomi 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 Xiaomi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiaomi has no effect on the direction of Grupo Carso i.e., Grupo Carso and Xiaomi go up and down completely randomly.

Pair Corralation between Grupo Carso and Xiaomi

Assuming the 90 days trading horizon Grupo Carso is expected to generate 12.68 times less return on investment than Xiaomi. But when comparing it to its historical volatility, Grupo Carso SAB is 2.62 times less risky than Xiaomi. It trades about 0.05 of its potential returns per unit of risk. Xiaomi is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  8,390  in Xiaomi on December 24, 2024 and sell it today you would earn a total of  6,410  from holding Xiaomi or generate 76.4% return on investment over 90 days.

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

Grupo Carso SAB  vs.  Xiaomi

Grupo Carso SAB

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Carso SAB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Grupo Carso is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Xiaomi

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xiaomi are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Xiaomi displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grupo Carso and Xiaomi

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

The idea behind Grupo Carso SAB and Xiaomi 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.