Correlation Between GMxico Transportes and NOV

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

Diversification Opportunities for GMxico Transportes and NOV

0.53

Correlation Coefficient

GMxico Transportes  NOV

Very weak diversification

The 3 months correlation between GMxico and NOV is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding GMxico Transportes SAB and NOV Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOV Inc 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 NOV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NOV Inc has no effect on the direction of GMxico Transportes i.e., GMxico Transportes and NOV go up and down completely randomly.

Pair Corralation between GMxico Transportes and NOV

Assuming the 90 days trading horizon GMxico Transportes SAB is expected to generate 1.45 times more return on investment than NOV. However, GMxico Transportes is 1.45 times more volatile than NOV Inc. It trades about -0.01 of its potential returns per unit of risk. NOV Inc is currently generating about -0.05 per unit of risk. If you would invest  3,692  in GMxico Transportes SAB on October 10, 2024 and sell it today you would lose (491.00) from holding GMxico Transportes SAB or give up 13.3% of portfolio value over 90 days.

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

GMxico Transportes SAB  vs.  NOV Inc

GMxico Transportes SAB

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GMxico Transportes SAB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, GMxico Transportes is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

NOV Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NOV Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, NOV is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GMxico Transportes and NOV

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

The idea behind GMxico Transportes SAB and NOV Inc 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.