Correlation Between MTR Corp and GMéxico Transportes

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

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

Diversification Opportunities for MTR Corp and GMéxico Transportes

-0.39

Correlation Coefficient

MTR Corp  GMéxico Transportes

Very good diversification

The 3 months correlation between MTR and GMéxico is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding MTR Corp Ltd and GMxico Transportes SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMxico Transportes SAB and MTR Corp 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 MTR Corp Ltd are associated (or correlated) with GMéxico Transportes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMxico Transportes SAB has no effect on the direction of MTR Corp i.e., MTR Corp and GMéxico Transportes go up and down completely randomly.

Pair Corralation between MTR Corp and GMéxico Transportes

Assuming the 90 days horizon MTR Corp Ltd is expected to under-perform the GMéxico Transportes. In addition to that, MTR Corp is 2.16 times more volatile than GMxico Transportes SAB. It trades about -0.39 of its total potential returns per unit of risk. GMxico Transportes SAB is currently generating about -0.22 per unit of volatility. If you would invest  162.00  in GMxico Transportes SAB on October 25, 2024 and sell it today you would lose (6.00) from holding GMxico Transportes SAB or give up 3.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.71%
Values	Daily Returns

MTR Corp Ltd  vs.  GMxico Transportes SAB

MTR Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

GMxico Transportes SAB

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GMxico Transportes SAB are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, GMéxico Transportes reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MTR Corp and GMéxico Transportes

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

The idea behind MTR Corp Ltd and GMxico Transportes 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.