Correlation Between Select Sector and GMxico Transportes
Can any of the company-specific risk be diversified away by investing in both Select Sector 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 Select Sector and GMxico Transportes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Select Sector and GMxico Transportes SAB, you can compare the effects of market volatilities on Select Sector 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 Select Sector with a short position of GMxico Transportes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select Sector and GMxico Transportes.
Diversification Opportunities for Select Sector and GMxico Transportes
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Select and GMxico is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding The Select Sector 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 Select Sector 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 The Select Sector 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 Select Sector i.e., Select Sector and GMxico Transportes go up and down completely randomly.
Pair Corralation between Select Sector and GMxico Transportes
Assuming the 90 days trading horizon The Select Sector is expected to generate 1.24 times more return on investment than GMxico Transportes. However, Select Sector is 1.24 times more volatile than GMxico Transportes SAB. It trades about 0.13 of its potential returns per unit of risk. GMxico Transportes SAB is currently generating about -0.08 per unit of risk. If you would invest 124,409 in The Select Sector on September 1, 2024 and sell it today you would earn a total of 46,191 from holding The Select Sector or generate 37.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Select Sector vs. GMxico Transportes SAB
Performance |
| Timeline |
| Select Sector |
| GMxico Transportes SAB |
Select Sector and GMxico Transportes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Select Sector and GMxico Transportes
The main advantage of trading using opposite Select Sector and GMxico Transportes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select Sector 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.| Select Sector vs. The Select Sector | Select Sector vs. The Select Sector | Select Sector vs. The Select Sector | Select Sector vs. The Select Sector |
| GMxico Transportes vs. Cognizant Technology Solutions | GMxico Transportes vs. McEwen Mining | GMxico Transportes vs. DXC Technology | GMxico Transportes vs. Micron Technology |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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