Correlation Between Pilbara Minerals and Grupo Mxico

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

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

Diversification Opportunities for Pilbara Minerals and Grupo Mxico

0.54

Correlation Coefficient

Pilbara Minerals  Grupo Mxico

Very weak diversification

The 3 months correlation between Pilbara and Grupo is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Pilbara Minerals Limited 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 Pilbara Minerals 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 Pilbara Minerals Limited 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 Pilbara Minerals i.e., Pilbara Minerals and Grupo Mxico go up and down completely randomly.

Pair Corralation between Pilbara Minerals and Grupo Mxico

Assuming the 90 days horizon Pilbara Minerals Limited is expected to under-perform the Grupo Mxico. In addition to that, Pilbara Minerals is 1.54 times more volatile than Grupo Mxico SAB. It trades about -0.11 of its total potential returns per unit of risk. Grupo Mxico SAB is currently generating about 0.0 per unit of volatility. If you would invest  538.00  in Grupo Mxico SAB on September 13, 2024 and sell it today you would lose (12.00) from holding Grupo Mxico SAB or give up 2.23% of portfolio value over 90 days.

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

Pilbara Minerals Limited  vs.  Grupo Mxico SAB

Pilbara Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pilbara Minerals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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. Despite nearly stable basic indicators, Grupo Mxico is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Pilbara Minerals and Grupo Mxico

The main advantage of trading using opposite Pilbara Minerals and Grupo Mxico positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pilbara Minerals 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 Pilbara Minerals Limited 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.