Correlation Between NUZE Old and GMéxico Transportes

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

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

Diversification Opportunities for NUZE Old and GMéxico Transportes

-0.68

Correlation Coefficient

NUZE Old  GMéxico Transportes

Excellent diversification

The 3 months correlation between NUZE and GMéxico is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding NUZE Old 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 NUZE Old 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 NUZE Old 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 NUZE Old i.e., NUZE Old and GMéxico Transportes go up and down completely randomly.

Pair Corralation between NUZE Old and GMéxico Transportes

Given the investment horizon of 90 days NUZE Old is expected to generate 2.65 times more return on investment than GMéxico Transportes. However, NUZE Old is 2.65 times more volatile than GMxico Transportes SAB. It trades about 0.1 of its potential returns per unit of risk. GMxico Transportes SAB is currently generating about 0.12 per unit of risk. If you would invest  95.00  in NUZE Old on October 25, 2024 and sell it today you would earn a total of  4.00  from holding NUZE Old or generate 4.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	9.52%
Values	Daily Returns

NUZE Old  vs.  GMxico Transportes SAB

NUZE Old

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days NUZE Old has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather fragile basic indicators, NUZE Old exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 NUZE Old and GMéxico Transportes

The main advantage of trading using opposite NUZE Old and GMéxico Transportes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NUZE Old 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 NUZE Old 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.