Correlation Between Masco and Grupo Mxico

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

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

Diversification Opportunities for Masco and Grupo Mxico

-0.68

Correlation Coefficient

Masco  Grupo Mxico

Excellent diversification

The 3 months correlation between Masco and Grupo is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Masco and Grupo Mxico SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Mxico SAB and Masco 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 Masco are associated (or correlated) with Grupo Mxico. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Mxico SAB has no effect on the direction of Masco i.e., Masco and Grupo Mxico go up and down completely randomly.

Pair Corralation between Masco and Grupo Mxico

Assuming the 90 days trading horizon Masco is expected to generate 2.0 times less return on investment than Grupo Mxico. But when comparing it to its historical volatility, Masco is 2.52 times less risky than Grupo Mxico. It trades about 0.05 of its potential returns per unit of risk. Grupo Mxico SAB is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  7,983  in Grupo Mxico SAB on September 24, 2024 and sell it today you would earn a total of  1,945  from holding Grupo Mxico SAB or generate 24.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.72%
Values	Daily Returns

Masco  vs.  Grupo Mxico SAB

Masco

Risk-Adjusted Performance

10 of 100

OK

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

Grupo Mxico SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Mxico SAB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Masco and Grupo Mxico

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

The idea behind Masco and Grupo Mxico SAB 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.