Correlation Between TRAVEL + and Grupo México

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

By analyzing existing cross correlation between TRAVEL LEISURE DL 01 and Grupo Mxico SAB, you can compare the effects of market volatilities on TRAVEL + and Grupo México 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 TRAVEL + with a short position of Grupo México. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRAVEL + and Grupo México.

Diversification Opportunities for TRAVEL + and Grupo México

0.35

Correlation Coefficient

TRAVEL +  Grupo México

Weak diversification

The 3 months correlation between TRAVEL and Grupo is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding TRAVEL LEISURE DL 01 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 TRAVEL + 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 TRAVEL LEISURE DL 01 are associated (or correlated) with Grupo México. 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 TRAVEL + i.e., TRAVEL + and Grupo México go up and down completely randomly.

Pair Corralation between TRAVEL + and Grupo México

Assuming the 90 days trading horizon TRAVEL + is expected to generate 1.92 times less return on investment than Grupo México. But when comparing it to its historical volatility, TRAVEL LEISURE DL 01 is 3.29 times less risky than Grupo México. It trades about 0.19 of its potential returns per unit of risk. Grupo Mxico SAB is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  372.00  in Grupo Mxico SAB on October 11, 2024 and sell it today you would earn a total of  113.00  from holding Grupo Mxico SAB or generate 30.38% return on investment over 90 days.

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

TRAVEL LEISURE DL 01  vs.  Grupo Mxico SAB

TRAVEL LEISURE DL

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TRAVEL LEISURE DL 01 are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TRAVEL + reported solid returns over the last few months and may actually be approaching a breakup point.

Grupo Mxico SAB

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Mxico SAB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Grupo México reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TRAVEL + and Grupo México

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

The idea behind TRAVEL LEISURE DL 01 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.