Correlation Between Grupo Simec and GILEAD

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

Diversification Opportunities for Grupo Simec and GILEAD

0.53
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Grupo and GILEAD is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Simec SAB and GILEAD SCIENCES INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GILEAD SCIENCES INC and Grupo Simec 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 Simec SAB are associated (or correlated) with GILEAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GILEAD SCIENCES INC has no effect on the direction of Grupo Simec i.e., Grupo Simec and GILEAD go up and down completely randomly.

Pair Corralation between Grupo Simec and GILEAD

Considering the 90-day investment horizon Grupo Simec SAB is expected to generate 5.11 times more return on investment than GILEAD. However, Grupo Simec is 5.11 times more volatile than GILEAD SCIENCES INC. It trades about 0.08 of its potential returns per unit of risk. GILEAD SCIENCES INC is currently generating about 0.0 per unit of risk. If you would invest  2,600  in Grupo Simec SAB on September 1, 2024 and sell it today you would earn a total of  89.00  from holding Grupo Simec SAB or generate 3.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy95.24%
ValuesDaily Returns

Grupo Simec SAB  vs.  GILEAD SCIENCES INC

 Performance 
       Timeline  
Grupo Simec SAB 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Grupo Simec SAB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Grupo Simec is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
GILEAD SCIENCES INC 

Risk-Adjusted Performance

0 of 100

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

Grupo Simec and GILEAD Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Grupo Simec and GILEAD

The main advantage of trading using opposite Grupo Simec and GILEAD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Simec position performs unexpectedly, GILEAD 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 GILEAD will offset losses from the drop in GILEAD's long position.
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The idea behind Grupo Simec SAB and GILEAD SCIENCES INC 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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