Correlation Between Bank Central and GMéxico Transportes

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

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

Diversification Opportunities for Bank Central and GMéxico Transportes

-0.73

Correlation Coefficient

Bank Central  GMéxico Transportes

Pay attention - limited upside

The 3 months correlation between Bank and GMéxico is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia 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 Bank Central 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 Bank Central Asia 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 Bank Central i.e., Bank Central and GMéxico Transportes go up and down completely randomly.

Pair Corralation between Bank Central and GMéxico Transportes

Assuming the 90 days horizon Bank Central Asia is expected to generate 2.2 times more return on investment than GMéxico Transportes. However, Bank Central is 2.2 times more volatile than GMxico Transportes SAB. It trades about -0.07 of its potential returns per unit of risk. GMxico Transportes SAB is currently generating about -0.22 per unit of risk. If you would invest  1,507  in Bank Central Asia on October 25, 2024 and sell it today you would lose (35.00) from holding Bank Central Asia or give up 2.32% of portfolio value over 90 days.

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

Bank Central Asia  vs.  GMxico Transportes SAB

Bank Central Asia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Central Asia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak 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 Bank Central and GMéxico Transportes

The main advantage of trading using opposite Bank Central and GMéxico Transportes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Central 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 Bank Central Asia 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.