Correlation Between Unilever PLC and GMxico Transportes

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

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

Diversification Opportunities for Unilever PLC and GMxico Transportes

0.07

Correlation Coefficient

Unilever PLC  GMxico Transportes

Significant diversification

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

Pair Corralation between Unilever PLC and GMxico Transportes

Assuming the 90 days trading horizon Unilever PLC is expected to under-perform the GMxico Transportes. But the stock apears to be less risky and, when comparing its historical volatility, Unilever PLC is 1.3 times less risky than GMxico Transportes. The stock trades about -0.12 of its potential returns per unit of risk. The GMxico Transportes SAB is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  3,350  in GMxico Transportes SAB on September 29, 2024 and sell it today you would lose (61.00) from holding GMxico Transportes SAB or give up 1.82% of portfolio value over 90 days.

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

Unilever PLC  vs.  GMxico Transportes SAB

Unilever PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unilever PLC 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.

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.

Pair Trading with Unilever PLC and GMxico Transportes

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

The idea behind Unilever PLC and GMxico Transportes SAB 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.