Correlation Between Farmacias Benavides and Alfa SAB

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

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

Diversification Opportunities for Farmacias Benavides and Alfa SAB

-0.1

Correlation Coefficient

Farmacias Benavides  Alfa SAB

Good diversification

The 3 months correlation between Farmacias and Alfa is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Farmacias Benavides SAB and Alfa SAB de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa SAB de and Farmacias Benavides 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 Farmacias Benavides SAB are associated (or correlated) with Alfa SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa SAB de has no effect on the direction of Farmacias Benavides i.e., Farmacias Benavides and Alfa SAB go up and down completely randomly.

Pair Corralation between Farmacias Benavides and Alfa SAB

Assuming the 90 days trading horizon Farmacias Benavides is expected to generate 2.7 times less return on investment than Alfa SAB. But when comparing it to its historical volatility, Farmacias Benavides SAB is 1.94 times less risky than Alfa SAB. It trades about 0.05 of its potential returns per unit of risk. Alfa SAB de is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,058  in Alfa SAB de on September 24, 2024 and sell it today you would earn a total of  488.00  from holding Alfa SAB de or generate 46.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.65%
Values	Daily Returns

Farmacias Benavides SAB  vs.  Alfa SAB de

Farmacias Benavides SAB

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Farmacias Benavides SAB are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Farmacias Benavides may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Alfa SAB de

Risk-Adjusted Performance

3 of 100

Insignificant

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 January 2025.

Pair Trading with Farmacias Benavides and Alfa SAB

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

The idea behind Farmacias Benavides SAB and Alfa 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.