Correlation Between Compania and Grupo Financiero
Can any of the company-specific risk be diversified away by investing in both Compania and Grupo Financiero 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 Compania and Grupo Financiero into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compania de Transporte and Grupo Financiero Galicia, you can compare the effects of market volatilities on Compania and Grupo Financiero 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 Compania with a short position of Grupo Financiero. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compania and Grupo Financiero.
Diversification Opportunities for Compania and Grupo Financiero
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Compania and Grupo is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Transporte and Grupo Financiero Galicia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Financiero Galicia and Compania 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 Compania de Transporte are associated (or correlated) with Grupo Financiero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Financiero Galicia has no effect on the direction of Compania i.e., Compania and Grupo Financiero go up and down completely randomly.
Pair Corralation between Compania and Grupo Financiero
Assuming the 90 days trading horizon Compania de Transporte is expected to generate 1.28 times more return on investment than Grupo Financiero. However, Compania is 1.28 times more volatile than Grupo Financiero Galicia. It trades about 0.14 of its potential returns per unit of risk. Grupo Financiero Galicia is currently generating about 0.16 per unit of risk. If you would invest 176,500 in Compania de Transporte on September 2, 2024 and sell it today you would earn a total of 44,500 from holding Compania de Transporte or generate 25.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compania de Transporte vs. Grupo Financiero Galicia
Performance |
| Timeline |
| Compania de Transporte |
| Grupo Financiero Galicia |
Compania and Grupo Financiero Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compania and Grupo Financiero
The main advantage of trading using opposite Compania and Grupo Financiero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compania position performs unexpectedly, Grupo Financiero 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 Financiero will offset losses from the drop in Grupo Financiero's long position.| Compania vs. Transportadora de Gas | Compania vs. Harmony Gold Mining | Compania vs. Telecom Argentina | Compania vs. United States Steel |
| Grupo Financiero vs. Harmony Gold Mining | Grupo Financiero vs. Compania de Transporte | Grupo Financiero vs. Agrometal SAI | Grupo Financiero vs. Telecom Argentina |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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