Correlation Between Grupo Financiero and CEMEX SAB

Can any of the company-specific risk be diversified away by investing in both Grupo Financiero and CEMEX SAB 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 Financiero and CEMEX SAB into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Grupo Financiero Banorte and CEMEX SAB de, you can compare the effects of market volatilities on Grupo Financiero and CEMEX SAB 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 Financiero with a short position of CEMEX SAB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo Financiero and CEMEX SAB.

Diversification Opportunities for Grupo Financiero and CEMEX SAB

0.05

Correlation Coefficient

Grupo Financiero  CEMEX SAB

Significant diversification

The 3 months correlation between Grupo and CEMEX is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Financiero Banorte and CEMEX SAB de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEMEX SAB de and Grupo Financiero 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 Financiero Banorte are associated (or correlated) with CEMEX SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEMEX SAB de has no effect on the direction of Grupo Financiero i.e., Grupo Financiero and CEMEX SAB go up and down completely randomly.

Pair Corralation between Grupo Financiero and CEMEX SAB

Assuming the 90 days trading horizon Grupo Financiero Banorte is expected to under-perform the CEMEX SAB. But the stock apears to be less risky and, when comparing its historical volatility, Grupo Financiero Banorte is 1.73 times less risky than CEMEX SAB. The stock trades about -0.11 of its potential returns per unit of risk. The CEMEX SAB de is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,058  in CEMEX SAB de on August 30, 2024 and sell it today you would earn a total of  60.00  from holding CEMEX SAB de or generate 5.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Grupo Financiero Banorte  vs.  CEMEX SAB de

Grupo Financiero Banorte

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Financiero Banorte has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

CEMEX SAB de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CEMEX SAB de has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, CEMEX SAB is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Grupo Financiero and CEMEX SAB

The main advantage of trading using opposite Grupo Financiero and CEMEX SAB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Financiero position performs unexpectedly, CEMEX SAB 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 CEMEX SAB will offset losses from the drop in CEMEX SAB's long position.

The idea behind Grupo Financiero Banorte and CEMEX SAB de 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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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.