Correlation Between GMxico Transportes and Cabot Oil

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

Diversification Opportunities for GMxico Transportes and Cabot Oil

-0.24

Correlation Coefficient

GMxico Transportes  Cabot Oil

Very good diversification

The 3 months correlation between GMxico and Cabot is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding GMxico Transportes SAB and Cabot Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabot Oil Gas 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 Cabot Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabot Oil Gas has no effect on the direction of GMxico Transportes i.e., GMxico Transportes and Cabot Oil go up and down completely randomly.

Pair Corralation between GMxico Transportes and Cabot Oil

Assuming the 90 days trading horizon GMxico Transportes is expected to generate 12.12 times less return on investment than Cabot Oil. In addition to that, GMxico Transportes is 1.26 times more volatile than Cabot Oil Gas. It trades about 0.01 of its total potential returns per unit of risk. Cabot Oil Gas is currently generating about 0.16 per unit of volatility. If you would invest  46,450  in Cabot Oil Gas on September 12, 2024 and sell it today you would earn a total of  7,850  from holding Cabot Oil Gas or generate 16.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

GMxico Transportes SAB  vs.  Cabot Oil Gas

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 fairly strong basic indicators, GMxico Transportes is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Cabot Oil Gas

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cabot Oil Gas are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Cabot Oil showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GMxico Transportes and Cabot Oil

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

The idea behind GMxico Transportes SAB and Cabot Oil Gas 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.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.