Correlation Between GMxico Transportes and New Oriental

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

Diversification Opportunities for GMxico Transportes and New Oriental

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Correlation Coefficient

GMxico Transportes  New Oriental

Pay attention - limited upside

The 3 months correlation between GMxico and New is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding GMxico Transportes SAB and New Oriental Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Oriental Education 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 New Oriental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Oriental Education has no effect on the direction of GMxico Transportes i.e., GMxico Transportes and New Oriental go up and down completely randomly.

Pair Corralation between GMxico Transportes and New Oriental

Assuming the 90 days trading horizon GMxico Transportes SAB is expected to generate 23.12 times more return on investment than New Oriental. However, GMxico Transportes is 23.12 times more volatile than New Oriental Education. It trades about 0.09 of its potential returns per unit of risk. New Oriental Education is currently generating about -0.22 per unit of risk. If you would invest  3,009  in GMxico Transportes SAB on September 2, 2024 and sell it today you would earn a total of  84.00  from holding GMxico Transportes SAB or generate 2.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

GMxico Transportes SAB  vs.  New Oriental Education

GMxico Transportes SAB

Risk-Adjusted Performance

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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 current stock price disturbance, may contribute to short-term losses for the investors.

New Oriental Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Oriental Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, New Oriental is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GMxico Transportes and New Oriental

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

The idea behind GMxico Transportes SAB and New Oriental Education 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.