Correlation Between Corporacion Financiera and Grupo Catalana

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

By analyzing existing cross correlation between Corporacion Financiera Alba and Grupo Catalana Occidente, you can compare the effects of market volatilities on Corporacion Financiera and Grupo Catalana 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 Corporacion Financiera with a short position of Grupo Catalana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Corporacion Financiera and Grupo Catalana.

Diversification Opportunities for Corporacion Financiera and Grupo Catalana

0.76

Correlation Coefficient

Corporacion Financiera  Grupo Catalana

Poor diversification

The 3 months correlation between Corporacion and Grupo is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Corporacion Financiera Alba and Grupo Catalana Occidente in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Catalana Occidente and Corporacion Financiera 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 Corporacion Financiera Alba are associated (or correlated) with Grupo Catalana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Catalana Occidente has no effect on the direction of Corporacion Financiera i.e., Corporacion Financiera and Grupo Catalana go up and down completely randomly.

Pair Corralation between Corporacion Financiera and Grupo Catalana

Assuming the 90 days trading horizon Corporacion Financiera is expected to generate 7.59 times less return on investment than Grupo Catalana. But when comparing it to its historical volatility, Corporacion Financiera Alba is 5.63 times less risky than Grupo Catalana. It trades about 0.15 of its potential returns per unit of risk. Grupo Catalana Occidente is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  3,619  in Grupo Catalana Occidente on December 23, 2024 and sell it today you would earn a total of  481.00  from holding Grupo Catalana Occidente or generate 13.29% return on investment over 90 days.

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

Corporacion Financiera Alba  vs.  Grupo Catalana Occidente

Corporacion Financiera

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Corporacion Financiera Alba are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Corporacion Financiera is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Grupo Catalana Occidente

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Catalana Occidente are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Grupo Catalana exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Corporacion Financiera and Grupo Catalana

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

The idea behind Corporacion Financiera Alba and Grupo Catalana Occidente 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.