Correlation Between Alsea SAB and Gruma SAB

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

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

Diversification Opportunities for Alsea SAB and Gruma SAB

0.63

Correlation Coefficient

Alsea SAB  Gruma SAB

Poor diversification

The 3 months correlation between Alsea and Gruma is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Alsea SAB de and Gruma SAB de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gruma SAB de and Alsea 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 Alsea SAB de are associated (or correlated) with Gruma SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gruma SAB de has no effect on the direction of Alsea SAB i.e., Alsea SAB and Gruma SAB go up and down completely randomly.

Pair Corralation between Alsea SAB and Gruma SAB

Assuming the 90 days trading horizon Alsea SAB de is expected to under-perform the Gruma SAB. In addition to that, Alsea SAB is 1.74 times more volatile than Gruma SAB de. It trades about -0.12 of its total potential returns per unit of risk. Gruma SAB de is currently generating about -0.13 per unit of volatility. If you would invest  34,369  in Gruma SAB de on October 11, 2024 and sell it today you would lose (1,414) from holding Gruma SAB de or give up 4.11% of portfolio value over 90 days.

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

Alsea SAB de  vs.  Gruma SAB de

Alsea SAB de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alsea SAB de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Gruma SAB de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gruma SAB de has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Alsea SAB and Gruma SAB

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

The idea behind Alsea SAB de and Gruma SAB de 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.