Correlation Between Grupo Mxico and Verizon Communications

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

Diversification Opportunities for Grupo Mxico and Verizon Communications

-0.04

Correlation Coefficient

Grupo Mxico  Verizon Communications

Good diversification

The 3 months correlation between Grupo and Verizon is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Mxico SAB and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and Grupo Mxico 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 Verizon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of Grupo Mxico i.e., Grupo Mxico and Verizon Communications go up and down completely randomly.

Pair Corralation between Grupo Mxico and Verizon Communications

Assuming the 90 days trading horizon Grupo Mxico SAB is expected to under-perform the Verizon Communications. But the stock apears to be less risky and, when comparing its historical volatility, Grupo Mxico SAB is 1.13 times less risky than Verizon Communications. The stock trades about -0.02 of its potential returns per unit of risk. The Verizon Communications is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  82,651  in Verizon Communications on September 5, 2024 and sell it today you would earn a total of  6,659  from holding Verizon Communications or generate 8.06% return on investment over 90 days.

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

Grupo Mxico SAB  vs.  Verizon Communications

Grupo Mxico SAB

Risk-Adjusted Performance

3 of 100

Insignificant

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

Verizon Communications

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Verizon Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Grupo Mxico and Verizon Communications

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

The idea behind Grupo Mxico SAB and Verizon Communications 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.

Check out your portfolio center.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.