Correlation Between Grupo Mxico and Grupo Financiero

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Can any of the company-specific risk be diversified away by investing in both Grupo Mxico and Grupo Financiero 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 Grupo Mxico and Grupo Financiero into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grupo Mxico SAB and Grupo Financiero Banorte, you can compare the effects of market volatilities on Grupo Mxico and Grupo Financiero 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 Grupo Mxico with a short position of Grupo Financiero. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo Mxico and Grupo Financiero.

Diversification Opportunities for Grupo Mxico and Grupo Financiero

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between Grupo and Grupo is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Mxico SAB and Grupo Financiero Banorte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Financiero Banorte and Grupo Mxico 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 Grupo Mxico SAB are associated (or correlated) with Grupo Financiero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Financiero Banorte has no effect on the direction of Grupo Mxico i.e., Grupo Mxico and Grupo Financiero go up and down completely randomly.

Pair Corralation between Grupo Mxico and Grupo Financiero

Assuming the 90 days trading horizon Grupo Mxico SAB is expected to under-perform the Grupo Financiero. In addition to that, Grupo Mxico is 1.21 times more volatile than Grupo Financiero Banorte. It trades about -0.18 of its total potential returns per unit of risk. Grupo Financiero Banorte is currently generating about -0.06 per unit of volatility. If you would invest  14,167  in Grupo Financiero Banorte on August 28, 2024 and sell it today you would lose (304.00) from holding Grupo Financiero Banorte or give up 2.15% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Grupo Mxico SAB  vs.  Grupo Financiero Banorte

 Performance 
       Timeline  
Grupo Mxico SAB 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Mxico SAB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Grupo Mxico is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.
Grupo Financiero Banorte 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Financiero Banorte are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Grupo Financiero is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Grupo Mxico and Grupo Financiero Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Grupo Mxico and Grupo Financiero

The main advantage of trading using opposite Grupo Mxico and Grupo Financiero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Mxico position performs unexpectedly, Grupo Financiero 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 Financiero will offset losses from the drop in Grupo Financiero's long position.
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The idea behind Grupo Mxico SAB and Grupo Financiero Banorte 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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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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