Correlation Between Grupo Cementos and CEMEX SAB

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

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

Diversification Opportunities for Grupo Cementos and CEMEX SAB

-0.36

Correlation Coefficient

Grupo Cementos  CEMEX SAB

Very good diversification

The 3 months correlation between Grupo and CEMEX is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Cementos de and CEMEX SAB de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEMEX SAB de and Grupo Cementos 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 Cementos de are associated (or correlated) with CEMEX SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEMEX SAB de has no effect on the direction of Grupo Cementos i.e., Grupo Cementos and CEMEX SAB go up and down completely randomly.

Pair Corralation between Grupo Cementos and CEMEX SAB

Assuming the 90 days trading horizon Grupo Cementos de is expected to generate 0.93 times more return on investment than CEMEX SAB. However, Grupo Cementos de is 1.08 times less risky than CEMEX SAB. It trades about 0.11 of its potential returns per unit of risk. CEMEX SAB de is currently generating about -0.03 per unit of risk. If you would invest  15,100  in Grupo Cementos de on August 30, 2024 and sell it today you would earn a total of  2,247  from holding Grupo Cementos de or generate 14.88% return on investment over 90 days.

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

Grupo Cementos de  vs.  CEMEX SAB de

Grupo Cementos de

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Cementos de are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Grupo Cementos showed solid returns over the last few months and may actually be approaching a breakup point.

CEMEX SAB de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CEMEX SAB de has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, CEMEX SAB is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Grupo Cementos and CEMEX SAB

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

The idea behind Grupo Cementos de and CEMEX SAB 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.