Correlation Between Alfa SAB and Farmacias Benavides

Can any of the company-specific risk be diversified away by investing in both Alfa SAB and Farmacias Benavides 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 Alfa SAB and Farmacias Benavides into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alfa SAB de and Farmacias Benavides SAB, you can compare the effects of market volatilities on Alfa SAB and Farmacias Benavides 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 Alfa SAB with a short position of Farmacias Benavides. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alfa SAB and Farmacias Benavides.

Diversification Opportunities for Alfa SAB and Farmacias Benavides

-0.1

Correlation Coefficient

Alfa SAB  Farmacias Benavides

Good diversification

The 3 months correlation between Alfa and Farmacias is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Alfa SAB de and Farmacias Benavides SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmacias Benavides SAB and Alfa SAB 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 Alfa SAB de are associated (or correlated) with Farmacias Benavides. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmacias Benavides SAB has no effect on the direction of Alfa SAB i.e., Alfa SAB and Farmacias Benavides go up and down completely randomly.

Pair Corralation between Alfa SAB and Farmacias Benavides

Assuming the 90 days trading horizon Alfa SAB de is expected to generate 1.89 times more return on investment than Farmacias Benavides. However, Alfa SAB is 1.89 times more volatile than Farmacias Benavides SAB. It trades about 0.04 of its potential returns per unit of risk. Farmacias Benavides SAB is currently generating about 0.06 per unit of risk. If you would invest  1,292  in Alfa SAB de on September 24, 2024 and sell it today you would earn a total of  254.00  from holding Alfa SAB de or generate 19.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Alfa SAB de  vs.  Farmacias Benavides SAB

Alfa SAB de

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa SAB de are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Alfa SAB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Farmacias Benavides SAB

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Farmacias Benavides SAB are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Farmacias Benavides may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alfa SAB and Farmacias Benavides

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

The idea behind Alfa SAB de and Farmacias Benavides 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.

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 Transaction History module to view history of all your transactions and understand their impact on performance.