Correlation Between GMxico Transportes and US Bancorp
Can any of the company-specific risk be diversified away by investing in both GMxico Transportes and US Bancorp 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 GMxico Transportes and US Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMxico Transportes SAB and US Bancorp, you can compare the effects of market volatilities on GMxico Transportes and US Bancorp 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 GMxico Transportes with a short position of US Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMxico Transportes and US Bancorp.
Diversification Opportunities for GMxico Transportes and US Bancorp
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GMxico and USB is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding GMxico Transportes SAB and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp and GMxico Transportes 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 GMxico Transportes SAB are associated (or correlated) with US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of GMxico Transportes i.e., GMxico Transportes and US Bancorp go up and down completely randomly.
Pair Corralation between GMxico Transportes and US Bancorp
Assuming the 90 days trading horizon GMxico Transportes is expected to generate 5.85 times less return on investment than US Bancorp. But when comparing it to its historical volatility, GMxico Transportes SAB is 1.21 times less risky than US Bancorp. It trades about 0.04 of its potential returns per unit of risk. US Bancorp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 98,663 in US Bancorp on September 12, 2024 and sell it today you would earn a total of 6,281 from holding US Bancorp or generate 6.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GMxico Transportes SAB vs. US Bancorp
Performance |
| Timeline |
| GMxico Transportes SAB |
| US Bancorp |
GMxico Transportes and US Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMxico Transportes and US Bancorp
The main advantage of trading using opposite GMxico Transportes and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMxico Transportes position performs unexpectedly, US Bancorp 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 US Bancorp will offset losses from the drop in US Bancorp's long position.| GMxico Transportes vs. Grupo Mxico SAB | GMxico Transportes vs. The Select Sector | GMxico Transportes vs. Promotora y Operadora | GMxico Transportes vs. iShares Global Timber |
| US Bancorp vs. Ameriprise Financial | US Bancorp vs. First Republic Bank | US Bancorp vs. United Airlines Holdings | US Bancorp vs. Grupo Sports World |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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