Correlation Between Alfa SAB and Grupo Financiero

Can any of the company-specific risk be diversified away by investing in both Alfa SAB 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 Alfa SAB and Grupo Financiero 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 Grupo Financiero Inbursa, you can compare the effects of market volatilities on Alfa SAB 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 Alfa SAB with a short position of Grupo Financiero. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alfa SAB and Grupo Financiero.

Diversification Opportunities for Alfa SAB and Grupo Financiero

0.03

Correlation Coefficient

Alfa SAB  Grupo Financiero

Significant diversification

The 3 months correlation between Alfa and Grupo is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Alfa SAB de and Grupo Financiero Inbursa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Financiero Inbursa 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 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 Inbursa has no effect on the direction of Alfa SAB i.e., Alfa SAB and Grupo Financiero go up and down completely randomly.

Pair Corralation between Alfa SAB and Grupo Financiero

Assuming the 90 days trading horizon Alfa SAB de is expected to generate 1.51 times more return on investment than Grupo Financiero. However, Alfa SAB is 1.51 times more volatile than Grupo Financiero Inbursa. It trades about 0.21 of its potential returns per unit of risk. Grupo Financiero Inbursa is currently generating about 0.06 per unit of risk. If you would invest  1,095  in Alfa SAB de on September 4, 2024 and sell it today you would earn a total of  515.00  from holding Alfa SAB de or generate 47.03% return on investment over 90 days.

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

Alfa SAB de  vs.  Grupo Financiero Inbursa

Alfa SAB de

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa SAB de are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Alfa SAB displayed solid returns over the last few months and may actually be approaching a breakup point.

Grupo Financiero Inbursa

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Financiero Inbursa are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental drivers, Grupo Financiero may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alfa SAB and Grupo Financiero

The main advantage of trading using opposite Alfa SAB and Grupo Financiero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alfa SAB 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.

The idea behind Alfa SAB de and Grupo Financiero Inbursa 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.