Correlation Between Grupo Lamosa and Masco

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

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

Diversification Opportunities for Grupo Lamosa and Masco

-0.67

Correlation Coefficient

Grupo Lamosa  Masco

Excellent diversification

The 3 months correlation between Grupo and Masco is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Lamosa SAB and Masco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masco and Grupo Lamosa 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 Lamosa SAB are associated (or correlated) with Masco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masco has no effect on the direction of Grupo Lamosa i.e., Grupo Lamosa and Masco go up and down completely randomly.

Pair Corralation between Grupo Lamosa and Masco

Assuming the 90 days trading horizon Grupo Lamosa SAB is expected to under-perform the Masco. In addition to that, Grupo Lamosa is 10.76 times more volatile than Masco. It trades about -0.08 of its total potential returns per unit of risk. Masco is currently generating about 0.13 per unit of volatility. If you would invest  114,242  in Masco on September 26, 2024 and sell it today you would earn a total of  584.00  from holding Masco or generate 0.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Grupo Lamosa SAB  vs.  Masco

Grupo Lamosa SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Lamosa SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Grupo Lamosa is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Masco

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Masco are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Masco is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Grupo Lamosa and Masco

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

The idea behind Grupo Lamosa SAB and Masco 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.