Correlation Between GMxico Transportes and BHP

Can any of the company-specific risk be diversified away by investing in both GMxico Transportes and BHP 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 BHP 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 BHP Group, you can compare the effects of market volatilities on GMxico Transportes and BHP 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 BHP. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMxico Transportes and BHP.

Diversification Opportunities for GMxico Transportes and BHP

-0.58

Correlation Coefficient

GMxico Transportes  BHP

Excellent diversification

The 3 months correlation between GMxico and BHP is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding GMxico Transportes SAB and BHP Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHP Group 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 BHP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHP Group has no effect on the direction of GMxico Transportes i.e., GMxico Transportes and BHP go up and down completely randomly.

Pair Corralation between GMxico Transportes and BHP

Assuming the 90 days trading horizon GMxico Transportes SAB is expected to under-perform the BHP. But the stock apears to be less risky and, when comparing its historical volatility, GMxico Transportes SAB is 1.25 times less risky than BHP. The stock trades about -0.07 of its potential returns per unit of risk. The BHP Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  101,953  in BHP Group on September 25, 2024 and sell it today you would earn a total of  11,967  from holding BHP Group or generate 11.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

GMxico Transportes SAB  vs.  BHP Group

GMxico Transportes SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GMxico Transportes SAB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

BHP Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BHP Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, BHP showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GMxico Transportes and BHP

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

The idea behind GMxico Transportes SAB and BHP Group 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.