Correlation Between Visa and GMxico Transportes

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

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

Diversification Opportunities for Visa and GMxico Transportes

0.2

Correlation Coefficient

Visa  GMxico Transportes

Modest diversification

The 3 months correlation between Visa and GMxico is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Visa Inc 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 Visa 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 Visa Inc are associated (or correlated) with GMxico 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 Visa i.e., Visa and GMxico Transportes go up and down completely randomly.

Pair Corralation between Visa and GMxico Transportes

Given the investment horizon of 90 days Visa Inc is expected to generate 0.87 times more return on investment than GMxico Transportes. However, Visa Inc is 1.15 times less risky than GMxico Transportes. It trades about 0.09 of its potential returns per unit of risk. GMxico Transportes SAB is currently generating about 0.06 per unit of risk. If you would invest  651,499  in Visa Inc on December 29, 2024 and sell it today you would earn a total of  47,001  from holding Visa Inc or generate 7.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Visa Inc  vs.  GMxico Transportes SAB

Visa Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in April 2025.

GMxico Transportes SAB

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GMxico Transportes SAB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, GMxico Transportes is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and GMxico Transportes

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

The idea behind Visa Inc 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.