Correlation Between US Bancorp and GMxico Transportes

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

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

Diversification Opportunities for US Bancorp and GMxico Transportes

-0.52

Correlation Coefficient

US Bancorp  GMxico Transportes

Excellent diversification

The 3 months correlation between USB and GMxico is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp 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 US Bancorp 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 US Bancorp 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 US Bancorp i.e., US Bancorp and GMxico Transportes go up and down completely randomly.

Pair Corralation between US Bancorp and GMxico Transportes

Assuming the 90 days trading horizon US Bancorp is expected to generate 1.03 times more return on investment than GMxico Transportes. However, US Bancorp is 1.03 times more volatile than GMxico Transportes SAB. It trades about 0.18 of its potential returns per unit of risk. GMxico Transportes SAB is currently generating about 0.01 per unit of risk. If you would invest  84,270  in US Bancorp on September 14, 2024 and sell it today you would earn a total of  20,674  from holding US Bancorp or generate 24.53% return on investment over 90 days.

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

US Bancorp  vs.  GMxico Transportes SAB

US Bancorp

Risk-Adjusted Performance

13 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in US Bancorp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, US Bancorp showed solid returns over the last few months and may actually be approaching a breakup point.

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

Pair Trading with US Bancorp and GMxico Transportes

The main advantage of trading using opposite US Bancorp and GMxico Transportes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Bancorp 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 US Bancorp 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.