Correlation Between Grupo Aeroportuario and Arca Continental

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

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

Diversification Opportunities for Grupo Aeroportuario and Arca Continental

0.57

Correlation Coefficient

Grupo Aeroportuario  Arca Continental

Very weak diversification

The 3 months correlation between Grupo and Arca is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Aeroportuario del and Arca Continental SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arca Continental SAB and Grupo Aeroportuario 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 Grupo Aeroportuario del are associated (or correlated) with Arca Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arca Continental SAB has no effect on the direction of Grupo Aeroportuario i.e., Grupo Aeroportuario and Arca Continental go up and down completely randomly.

Pair Corralation between Grupo Aeroportuario and Arca Continental

Assuming the 90 days trading horizon Grupo Aeroportuario is expected to generate 1.15 times less return on investment than Arca Continental. But when comparing it to its historical volatility, Grupo Aeroportuario del is 1.52 times less risky than Arca Continental. It trades about 0.12 of its potential returns per unit of risk. Arca Continental SAB is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  17,403  in Arca Continental SAB on September 17, 2024 and sell it today you would earn a total of  501.00  from holding Arca Continental SAB or generate 2.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Grupo Aeroportuario del  vs.  Arca Continental SAB

Grupo Aeroportuario del

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Aeroportuario del are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Grupo Aeroportuario is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Arca Continental SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arca Continental SAB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Arca Continental is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Grupo Aeroportuario and Arca Continental

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

The idea behind Grupo Aeroportuario del and Arca Continental 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..