Correlation Between BBVA Banco and Grupo Financiero

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

By analyzing existing cross correlation between BBVA Banco Frances and Grupo Financiero Galicia, you can compare the effects of market volatilities on BBVA Banco 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 BBVA Banco with a short position of Grupo Financiero. Check out your portfolio center. Please also check ongoing floating volatility patterns of BBVA Banco and Grupo Financiero.

Diversification Opportunities for BBVA Banco and Grupo Financiero

0.96

Correlation Coefficient

BBVA Banco  Grupo Financiero

Almost no diversification

The 3 months correlation between BBVA and Grupo is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding BBVA Banco Frances and Grupo Financiero Galicia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Financiero Galicia and BBVA Banco 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 BBVA Banco Frances 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 Galicia has no effect on the direction of BBVA Banco i.e., BBVA Banco and Grupo Financiero go up and down completely randomly.

Pair Corralation between BBVA Banco and Grupo Financiero

Given the investment horizon of 90 days BBVA Banco Frances is expected to generate 1.23 times more return on investment than Grupo Financiero. However, BBVA Banco is 1.23 times more volatile than Grupo Financiero Galicia. It trades about 0.02 of its potential returns per unit of risk. Grupo Financiero Galicia is currently generating about -0.02 per unit of risk. If you would invest  1,905  in BBVA Banco Frances on December 28, 2024 and sell it today you would earn a total of  9.00  from holding BBVA Banco Frances or generate 0.47% return on investment over 90 days.

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

BBVA Banco Frances  vs.  Grupo Financiero Galicia

BBVA Banco Frances

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BBVA Banco Frances are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, BBVA Banco is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Grupo Financiero Galicia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grupo Financiero Galicia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Grupo Financiero is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with BBVA Banco and Grupo Financiero

The main advantage of trading using opposite BBVA Banco and Grupo Financiero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBVA Banco 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 BBVA Banco Frances and Grupo Financiero Galicia 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.