Correlation Between West Japan and GMxico Transportes
Can any of the company-specific risk be diversified away by investing in both West Japan and GMxico 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 West Japan and GMxico Transportes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between West Japan Railway and GMxico Transportes SAB, you can compare the effects of market volatilities on West Japan and GMxico 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 West Japan with a short position of GMxico Transportes. Check out your portfolio center. Please also check ongoing floating volatility patterns of West Japan and GMxico Transportes.
Diversification Opportunities for West Japan and GMxico Transportes
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between West and GMxico is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding West 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 West 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 West Japan Railway are associated (or correlated) with GMxico 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 West Japan i.e., West Japan and GMxico Transportes go up and down completely randomly.
Pair Corralation between West Japan and GMxico Transportes
Assuming the 90 days horizon West Japan is expected to generate 6.61 times less return on investment than GMxico Transportes. But when comparing it to its historical volatility, West Japan Railway is 9.27 times less risky than GMxico Transportes. It trades about 0.27 of its potential returns per unit of risk. GMxico Transportes SAB is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 110.00 in GMxico Transportes SAB on September 1, 2024 and sell it today you would earn a total of 45.00 from holding GMxico Transportes SAB or generate 40.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
West Japan Railway vs. GMxico Transportes SAB
Performance |
| Timeline |
| West Japan Railway |
| GMxico Transportes SAB |
West Japan and GMxico Transportes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with West Japan and GMxico Transportes
The main advantage of trading using opposite West Japan and GMxico Transportes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if West Japan position performs unexpectedly, GMxico 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 GMxico Transportes will offset losses from the drop in GMxico Transportes' long position.| West Japan vs. Central Japan Railway | West Japan vs. LB Foster | West Japan vs. East Japan Railway | West Japan vs. Greenbrier Companies |
| GMxico Transportes vs. West Japan Railway | GMxico Transportes vs. Central Japan Railway | GMxico Transportes vs. LB Foster | GMxico 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 CEOs Directory module to screen CEOs from public companies around the world.
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