Correlation Between American International and Grupo Gigante

Can any of the company-specific risk be diversified away by investing in both American International and Grupo Gigante 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 American International and Grupo Gigante into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American International Group and Grupo Gigante S, you can compare the effects of market volatilities on American International and Grupo Gigante 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 American International with a short position of Grupo Gigante. Check out your portfolio center. Please also check ongoing floating volatility patterns of American International and Grupo Gigante.

Diversification Opportunities for American International and Grupo Gigante

-0.61

Correlation Coefficient

American International  Grupo Gigante

Excellent diversification

The 3 months correlation between American and Grupo is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding American International Group and Grupo Gigante S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Gigante S and American International 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 American International Group are associated (or correlated) with Grupo Gigante. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Gigante S has no effect on the direction of American International i.e., American International and Grupo Gigante go up and down completely randomly.

Pair Corralation between American International and Grupo Gigante

Assuming the 90 days trading horizon American International Group is expected to under-perform the Grupo Gigante. But the stock apears to be less risky and, when comparing its historical volatility, American International Group is 2.67 times less risky than Grupo Gigante. The stock trades about -0.18 of its potential returns per unit of risk. The Grupo Gigante S is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  2,500  in Grupo Gigante S on October 10, 2024 and sell it today you would earn a total of  300.00  from holding Grupo Gigante S or generate 12.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

American International Group  vs.  Grupo Gigante S

American International

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American International Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, American International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Grupo Gigante S

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Gigante S are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Grupo Gigante is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with American International and Grupo Gigante

The main advantage of trading using opposite American International and Grupo Gigante positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American International position performs unexpectedly, Grupo Gigante 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 Gigante will offset losses from the drop in Grupo Gigante's long position.

The idea behind American International Group and Grupo Gigante S 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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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.