Correlation Between GMxico Transportes and First Solar

Can any of the company-specific risk be diversified away by investing in both GMxico Transportes and First Solar 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 GMxico Transportes and First Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for GMxico Transportes and First Solar

0.46

Correlation Coefficient

GMxico Transportes  First Solar

Very weak diversification

The 3 months correlation between GMxico and First is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding GMxico Transportes SAB and First Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Solar and GMxico Transportes 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 GMxico Transportes SAB are associated (or correlated) with First Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Solar has no effect on the direction of GMxico Transportes i.e., GMxico Transportes and First Solar go up and down completely randomly.

Pair Corralation between GMxico Transportes and First Solar

Assuming the 90 days trading horizon GMxico Transportes SAB is expected to generate 0.5 times more return on investment than First Solar. However, GMxico Transportes SAB is 1.99 times less risky than First Solar. It trades about 0.14 of its potential returns per unit of risk. First Solar is currently generating about -0.14 per unit of risk. If you would invest  3,092  in GMxico Transportes SAB on September 25, 2024 and sell it today you would earn a total of  108.00  from holding GMxico Transportes SAB or generate 3.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

GMxico Transportes SAB  vs.  First Solar

GMxico Transportes SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GMxico Transportes SAB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

First Solar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Solar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with GMxico Transportes and First Solar

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

The idea behind GMxico Transportes SAB and First Solar 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.