Correlation Between Central Japan and GMéxico Transportes
Can any of the company-specific risk be diversified away by investing in both Central Japan 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 Central Japan and GMéxico Transportes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Central Japan Railway and GMxico Transportes SAB, you can compare the effects of market volatilities on Central Japan 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 Central Japan with a short position of GMéxico Transportes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Japan and GMéxico Transportes.
Diversification Opportunities for Central Japan and GMéxico Transportes
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Central and GMéxico is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Central Japan Railway 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 Central Japan 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 Central Japan Railway 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 Central Japan i.e., Central Japan and GMéxico Transportes go up and down completely randomly.
Pair Corralation between Central Japan and GMéxico Transportes
Assuming the 90 days horizon Central Japan Railway is expected to generate 0.95 times more return on investment than GMéxico Transportes. However, Central Japan Railway is 1.06 times less risky than GMéxico Transportes. It trades about -0.03 of its potential returns per unit of risk. GMxico Transportes SAB is currently generating about -0.03 per unit of risk. If you would invest 1,201 in Central Japan Railway on November 27, 2024 and sell it today you would lose (250.00) from holding Central Japan Railway or give up 20.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.95% |
| Values | Daily Returns |
Central Japan Railway vs. GMxico Transportes SAB
Performance |
| Timeline |
| Central Japan Railway |
| GMxico Transportes SAB |
Central Japan and GMéxico Transportes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Central Japan and GMéxico Transportes
The main advantage of trading using opposite Central Japan and GMéxico Transportes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Japan 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.| Central Japan vs. West Japan Railway | Central Japan vs. LB Foster | Central Japan vs. East Japan Railway | Central Japan vs. Canadian National Railway |
| GMéxico Transportes vs. West Japan Railway | GMéxico Transportes vs. Central Japan Railway | GMéxico Transportes vs. LB Foster | GMéxico Transportes vs. Norfolk Southern |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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