Correlation Between Grupo Financiero and Grupo Herdez

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

Diversification Opportunities for Grupo Financiero and Grupo Herdez

0.21
  Correlation Coefficient

Modest diversification

The 3 months correlation between Grupo and Grupo is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Financiero Banorte and Grupo Herdez SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Herdez SAB and Grupo Financiero 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 Financiero Banorte are associated (or correlated) with Grupo Herdez. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Herdez SAB has no effect on the direction of Grupo Financiero i.e., Grupo Financiero and Grupo Herdez go up and down completely randomly.

Pair Corralation between Grupo Financiero and Grupo Herdez

Assuming the 90 days trading horizon Grupo Financiero Banorte is expected to generate 1.11 times more return on investment than Grupo Herdez. However, Grupo Financiero is 1.11 times more volatile than Grupo Herdez SAB. It trades about 0.04 of its potential returns per unit of risk. Grupo Herdez SAB is currently generating about 0.02 per unit of risk. If you would invest  13,083  in Grupo Financiero Banorte on September 5, 2024 and sell it today you would earn a total of  1,095  from holding Grupo Financiero Banorte or generate 8.37% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Grupo Financiero Banorte  vs.  Grupo Herdez SAB

 Performance 
       Timeline  
Grupo Financiero Banorte 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Financiero Banorte are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Grupo Financiero is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.
Grupo Herdez SAB 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Grupo Herdez SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Grupo Herdez is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Grupo Financiero and Grupo Herdez Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Grupo Financiero and Grupo Herdez

The main advantage of trading using opposite Grupo Financiero and Grupo Herdez positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Financiero position performs unexpectedly, Grupo Herdez 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 Grupo Herdez will offset losses from the drop in Grupo Herdez's long position.
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The idea behind Grupo Financiero Banorte and Grupo Herdez 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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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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