Correlation Between Alfa SAB and Gentera SAB

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Can any of the company-specific risk be diversified away by investing in both Alfa SAB and Gentera 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 Alfa SAB and Gentera SAB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alfa SAB de and Gentera SAB de, you can compare the effects of market volatilities on Alfa SAB and Gentera 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 Alfa SAB with a short position of Gentera SAB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alfa SAB and Gentera SAB.

Diversification Opportunities for Alfa SAB and Gentera SAB

0.76
  Correlation Coefficient

Poor diversification

The 3 months correlation between Alfa and Gentera is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Alfa SAB de and Gentera SAB de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gentera SAB de and Alfa SAB 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 Alfa SAB de are associated (or correlated) with Gentera SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gentera SAB de has no effect on the direction of Alfa SAB i.e., Alfa SAB and Gentera SAB go up and down completely randomly.

Pair Corralation between Alfa SAB and Gentera SAB

Assuming the 90 days trading horizon Alfa SAB de is expected to generate 0.91 times more return on investment than Gentera SAB. However, Alfa SAB de is 1.1 times less risky than Gentera SAB. It trades about 0.06 of its potential returns per unit of risk. Gentera SAB de is currently generating about 0.05 per unit of risk. If you would invest  1,028  in Alfa SAB de on August 27, 2024 and sell it today you would earn a total of  476.00  from holding Alfa SAB de or generate 46.3% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Alfa SAB de  vs.  Gentera SAB de

 Performance 
       Timeline  
Alfa SAB de 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Alfa SAB de are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Alfa SAB displayed solid returns over the last few months and may actually be approaching a breakup point.
Gentera SAB de 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Gentera SAB de are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gentera SAB sustained solid returns over the last few months and may actually be approaching a breakup point.

Alfa SAB and Gentera SAB Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alfa SAB and Gentera SAB

The main advantage of trading using opposite Alfa SAB and Gentera SAB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alfa SAB position performs unexpectedly, Gentera 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 Gentera SAB will offset losses from the drop in Gentera SAB's long position.
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The idea behind Alfa SAB de and Gentera 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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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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