Correlation Between Alfa SAB and Grupo Simec

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

Diversification Opportunities for Alfa SAB and Grupo Simec

0.16

Correlation Coefficient

Alfa SAB  Grupo Simec

Average diversification

The 3 months correlation between Alfa and Grupo is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Alfa SAB de and Grupo Simec SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Simec 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 Grupo Simec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Simec SAB has no effect on the direction of Alfa SAB i.e., Alfa SAB and Grupo Simec go up and down completely randomly.

Pair Corralation between Alfa SAB and Grupo Simec

Assuming the 90 days trading horizon Alfa SAB is expected to generate 1.26 times less return on investment than Grupo Simec. In addition to that, Alfa SAB is 2.55 times more volatile than Grupo Simec SAB. It trades about 0.04 of its total potential returns per unit of risk. Grupo Simec SAB is currently generating about 0.14 per unit of volatility. If you would invest  18,495  in Grupo Simec SAB on October 15, 2024 and sell it today you would earn a total of  305.00  from holding Grupo Simec SAB or generate 1.65% 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 Simec SAB

Alfa SAB de

Risk-Adjusted Performance

3 of 100

Weak

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 February 2025.

Grupo Simec SAB

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Simec SAB are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Grupo Simec is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alfa SAB and Grupo Simec

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

The idea behind Alfa SAB de and Grupo Simec 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.

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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 Anywhere module to track or share privately all of your investments from the convenience of any device.