Correlation Between GMxico Transportes and General Dynamics

Can any of the company-specific risk be diversified away by investing in both GMxico Transportes and General Dynamics 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 General Dynamics 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 General Dynamics, you can compare the effects of market volatilities on GMxico Transportes and General Dynamics 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 General Dynamics. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMxico Transportes and General Dynamics.

Diversification Opportunities for GMxico Transportes and General Dynamics

-0.27

Correlation Coefficient

GMxico Transportes  General Dynamics

Very good diversification

The 3 months correlation between GMxico and General is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding GMxico Transportes SAB and General Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Dynamics 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 General Dynamics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Dynamics has no effect on the direction of GMxico Transportes i.e., GMxico Transportes and General Dynamics go up and down completely randomly.

Pair Corralation between GMxico Transportes and General Dynamics

Assuming the 90 days trading horizon GMxico Transportes SAB is expected to generate 0.95 times more return on investment than General Dynamics. However, GMxico Transportes SAB is 1.05 times less risky than General Dynamics. It trades about 0.2 of its potential returns per unit of risk. General Dynamics is currently generating about -0.29 per unit of risk. If you would invest  3,048  in GMxico Transportes SAB on September 27, 2024 and sell it today you would earn a total of  152.00  from holding GMxico Transportes SAB or generate 4.99% return on investment over 90 days.

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

GMxico Transportes SAB  vs.  General Dynamics

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 unfluctuating 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.

General Dynamics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with GMxico Transportes and General Dynamics

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

The idea behind GMxico Transportes SAB and General Dynamics 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.