Correlation Between Grupo Financiero and CEMEX SAB

Can any of the company-specific risk be diversified away by investing in both Grupo Financiero 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 Financiero 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 Financiero Banorte and CEMEX SAB de, you can compare the effects of market volatilities on Grupo Financiero 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 Financiero with a short position of CEMEX SAB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo Financiero and CEMEX SAB.

Diversification Opportunities for Grupo Financiero and CEMEX SAB

0.77

Correlation Coefficient

Grupo Financiero  CEMEX SAB

Poor diversification

The 3 months correlation between Grupo and CEMEX is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Financiero Banorte 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 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 Banorte 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 Financiero i.e., Grupo Financiero and CEMEX SAB go up and down completely randomly.

Pair Corralation between Grupo Financiero and CEMEX SAB

Assuming the 90 days trading horizon Grupo Financiero is expected to generate 1.58 times less return on investment than CEMEX SAB. But when comparing it to its historical volatility, Grupo Financiero Banorte is 1.43 times less risky than CEMEX SAB. It trades about 0.12 of its potential returns per unit of risk. CEMEX SAB de is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,119  in CEMEX SAB de on November 28, 2024 and sell it today you would earn a total of  205.00  from holding CEMEX SAB de or generate 18.32% return on investment over 90 days.

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

Grupo Financiero Banorte  vs.  CEMEX SAB de

Grupo Financiero Banorte

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Financiero Banorte are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Grupo Financiero may actually be approaching a critical reversion point that can send shares even higher in March 2025.

CEMEX SAB de

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CEMEX SAB de are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, CEMEX SAB reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grupo Financiero and CEMEX SAB

The main advantage of trading using opposite Grupo Financiero and CEMEX SAB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Financiero 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 Financiero Banorte 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.