Correlation Between Vale SA and Grupo México
Can any of the company-specific risk be diversified away by investing in both Vale SA 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 Vale SA and Grupo México into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vale SA and Grupo Mxico SAB, you can compare the effects of market volatilities on Vale SA 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 Vale SA with a short position of Grupo México. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Grupo México.
Diversification Opportunities for Vale SA and Grupo México
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Vale and Grupo is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA 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 Vale SA 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 Vale SA 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 Vale SA i.e., Vale SA and Grupo México go up and down completely randomly.
Pair Corralation between Vale SA and Grupo México
Assuming the 90 days trading horizon Vale SA is expected to under-perform the Grupo México. But the stock apears to be less risky and, when comparing its historical volatility, Vale SA is 1.3 times less risky than Grupo México. The stock trades about -0.11 of its potential returns per unit of risk. The Grupo Mxico SAB is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 489.00 in Grupo Mxico SAB on October 12, 2024 and sell it today you would earn a total of 3.00 from holding Grupo Mxico SAB or generate 0.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vale SA vs. Grupo Mxico SAB
Performance |
| Timeline |
| Vale SA |
| Grupo Mxico SAB |
Vale SA and Grupo México Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale SA and Grupo México
The main advantage of trading using opposite Vale SA and Grupo México positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA 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 Vale SA 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.| Grupo México vs. CHRYSALIS INVESTMENTS LTD | Grupo México vs. Costco Wholesale Corp | Grupo México vs. Scottish Mortgage Investment | Grupo México vs. JIAHUA STORES |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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