Correlation Between Grupo Catalana and Renta 4
Can any of the company-specific risk be diversified away by investing in both Grupo Catalana and Renta 4 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 Catalana and Renta 4 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grupo Catalana Occidente and Renta 4 Banco, you can compare the effects of market volatilities on Grupo Catalana and Renta 4 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 Catalana with a short position of Renta 4. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo Catalana and Renta 4.
Diversification Opportunities for Grupo Catalana and Renta 4
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Grupo and Renta is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Catalana Occidente and Renta 4 Banco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renta 4 Banco and Grupo Catalana 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 Catalana Occidente are associated (or correlated) with Renta 4. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renta 4 Banco has no effect on the direction of Grupo Catalana i.e., Grupo Catalana and Renta 4 go up and down completely randomly.
Pair Corralation between Grupo Catalana and Renta 4
Assuming the 90 days trading horizon Grupo Catalana is expected to generate 1.33 times less return on investment than Renta 4. But when comparing it to its historical volatility, Grupo Catalana Occidente is 1.29 times less risky than Renta 4. It trades about 0.06 of its potential returns per unit of risk. Renta 4 Banco is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 903.00 in Renta 4 Banco on August 27, 2024 and sell it today you would earn a total of 387.00 from holding Renta 4 Banco or generate 42.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.01% |
| Values | Daily Returns |
Grupo Catalana Occidente vs. Renta 4 Banco
Performance |
| Timeline |
| Grupo Catalana Occidente |
| Renta 4 Banco |
Grupo Catalana and Renta 4 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Grupo Catalana and Renta 4
The main advantage of trading using opposite Grupo Catalana and Renta 4 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Catalana position performs unexpectedly, Renta 4 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 Renta 4 will offset losses from the drop in Renta 4's long position.The idea behind Grupo Catalana Occidente and Renta 4 Banco 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.| Renta 4 vs. Grupo Catalana Occidente | Renta 4 vs. Miquel y Costas | Renta 4 vs. Faes Farma SA | Renta 4 vs. Azkoyen |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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