Correlation Between Nemak S and Axtel SAB

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

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

Diversification Opportunities for Nemak S and Axtel SAB

-0.07

Correlation Coefficient

Nemak S  Axtel SAB

Good diversification

The 3 months correlation between Nemak and Axtel is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Nemak S A and Axtel SAB de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axtel SAB de and Nemak S 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 Nemak S A are associated (or correlated) with Axtel SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axtel SAB de has no effect on the direction of Nemak S i.e., Nemak S and Axtel SAB go up and down completely randomly.

Pair Corralation between Nemak S and Axtel SAB

Assuming the 90 days trading horizon Nemak S A is expected to under-perform the Axtel SAB. But the stock apears to be less risky and, when comparing its historical volatility, Nemak S A is 1.2 times less risky than Axtel SAB. The stock trades about -0.06 of its potential returns per unit of risk. The Axtel SAB de is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  116.00  in Axtel SAB de on September 5, 2024 and sell it today you would lose (1.00) from holding Axtel SAB de or give up 0.86% of portfolio value over 90 days.

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

Nemak S A  vs.  Axtel SAB de

Nemak S A

Risk-Adjusted Performance

0 of 100

Very Weak

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

Axtel SAB de

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Nemak S and Axtel SAB

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

The idea behind Nemak S A and Axtel 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.