Correlation Between Grupo México and Edison Cobalt

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

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

Diversification Opportunities for Grupo México and Edison Cobalt

-0.2

Correlation Coefficient

Grupo México  Edison Cobalt

Good diversification

The 3 months correlation between Grupo and Edison is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Mxico SAB and Edison Cobalt Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edison Cobalt Corp and Grupo México 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 Mxico SAB are associated (or correlated) with Edison Cobalt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edison Cobalt Corp has no effect on the direction of Grupo México i.e., Grupo México and Edison Cobalt go up and down completely randomly.

Pair Corralation between Grupo México and Edison Cobalt

Assuming the 90 days horizon Grupo Mxico SAB is expected to under-perform the Edison Cobalt. But the pink sheet apears to be less risky and, when comparing its historical volatility, Grupo Mxico SAB is 3.49 times less risky than Edison Cobalt. The pink sheet trades about -0.08 of its potential returns per unit of risk. The Edison Cobalt Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  6.20  in Edison Cobalt Corp on December 2, 2024 and sell it today you would earn a total of  0.66  from holding Edison Cobalt Corp or generate 10.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Grupo Mxico SAB  vs.  Edison Cobalt Corp

Grupo Mxico SAB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grupo Mxico SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Grupo México is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Edison Cobalt Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Edison Cobalt Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Edison Cobalt reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grupo México and Edison Cobalt

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

The idea behind Grupo Mxico SAB and Edison Cobalt Corp 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.