Correlation Between Altarea SCA and Groupimo

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

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

Diversification Opportunities for Altarea SCA and Groupimo

0.35

Correlation Coefficient

Altarea SCA  Groupimo

Weak diversification

The 3 months correlation between Altarea and Groupimo is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Altarea SCA and Groupimo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Groupimo SA and Altarea SCA 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 Altarea SCA are associated (or correlated) with Groupimo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Groupimo SA has no effect on the direction of Altarea SCA i.e., Altarea SCA and Groupimo go up and down completely randomly.

Pair Corralation between Altarea SCA and Groupimo

Assuming the 90 days trading horizon Altarea SCA is expected to generate 0.25 times more return on investment than Groupimo. However, Altarea SCA is 4.0 times less risky than Groupimo. It trades about 0.05 of its potential returns per unit of risk. Groupimo SA is currently generating about -0.02 per unit of risk. If you would invest  7,496  in Altarea SCA on October 5, 2024 and sell it today you would earn a total of  2,454  from holding Altarea SCA or generate 32.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.68%
Values	Daily Returns

Altarea SCA  vs.  Groupimo SA

Altarea SCA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Altarea SCA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Altarea SCA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Groupimo SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Groupimo SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Groupimo reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Altarea SCA and Groupimo

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

The idea behind Altarea SCA and Groupimo SA 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.