Correlation Between Empresa Distribuidora and Grupo Financiero

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

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

Diversification Opportunities for Empresa Distribuidora and Grupo Financiero

0.37

Correlation Coefficient

Empresa Distribuidora  Grupo Financiero

Weak diversification

The 3 months correlation between Empresa and Grupo is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Empresa Distribuidora y 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 Empresa Distribuidora 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 Empresa Distribuidora y 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 Empresa Distribuidora i.e., Empresa Distribuidora and Grupo Financiero go up and down completely randomly.

Pair Corralation between Empresa Distribuidora and Grupo Financiero

Considering the 90-day investment horizon Empresa Distribuidora y is expected to under-perform the Grupo Financiero. In addition to that, Empresa Distribuidora is 1.24 times more volatile than Grupo Financiero Galicia. It trades about -0.1 of its total potential returns per unit of risk. Grupo Financiero Galicia is currently generating about -0.04 per unit of volatility. If you would invest  6,282  in Grupo Financiero Galicia on December 28, 2024 and sell it today you would lose (704.00) from holding Grupo Financiero Galicia or give up 11.21% of portfolio value over 90 days.

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

Empresa Distribuidora y  vs.  Grupo Financiero Galicia

Empresa Distribuidora

Risk-Adjusted Performance

Very Weak

Over the last 90 days Empresa Distribuidora y 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 fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm 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 latest abnormal performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Empresa Distribuidora and Grupo Financiero

The main advantage of trading using opposite Empresa Distribuidora and Grupo Financiero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empresa Distribuidora 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 Empresa Distribuidora y 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.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.