Correlation Between Grupo Financiero and Bolsa Mexicana

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

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

Diversification Opportunities for Grupo Financiero and Bolsa Mexicana

0.01

Correlation Coefficient

Grupo Financiero  Bolsa Mexicana

Significant diversification

The 3 months correlation between Grupo and Bolsa is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Financiero Inbursa and Bolsa Mexicana de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bolsa Mexicana de and Grupo Financiero 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 Financiero Inbursa are associated (or correlated) with Bolsa Mexicana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bolsa Mexicana de has no effect on the direction of Grupo Financiero i.e., Grupo Financiero and Bolsa Mexicana go up and down completely randomly.

Pair Corralation between Grupo Financiero and Bolsa Mexicana

Assuming the 90 days trading horizon Grupo Financiero Inbursa is expected to under-perform the Bolsa Mexicana. But the stock apears to be less risky and, when comparing its historical volatility, Grupo Financiero Inbursa is 1.31 times less risky than Bolsa Mexicana. The stock trades about -0.14 of its potential returns per unit of risk. The Bolsa Mexicana de is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,360  in Bolsa Mexicana de on September 24, 2024 and sell it today you would earn a total of  34.00  from holding Bolsa Mexicana de or generate 1.01% return on investment over 90 days.

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

Grupo Financiero Inbursa  vs.  Bolsa Mexicana de

Grupo Financiero Inbursa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Financiero Inbursa has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Grupo Financiero is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Bolsa Mexicana de

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bolsa Mexicana de are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Bolsa Mexicana is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Grupo Financiero and Bolsa Mexicana

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

The idea behind Grupo Financiero Inbursa and Bolsa Mexicana 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.