Correlation Between Financiera Independencia and Vanguard World

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

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

Diversification Opportunities for Financiera Independencia and Vanguard World

-0.45

Correlation Coefficient

Financiera Independencia  Vanguard World

Very good diversification

The 3 months correlation between Financiera and Vanguard is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Financiera Independencia SAB and Vanguard World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard World and Financiera Independencia 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 Financiera Independencia SAB are associated (or correlated) with Vanguard World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard World has no effect on the direction of Financiera Independencia i.e., Financiera Independencia and Vanguard World go up and down completely randomly.

Pair Corralation between Financiera Independencia and Vanguard World

Assuming the 90 days trading horizon Financiera Independencia SAB is expected to under-perform the Vanguard World. But the stock apears to be less risky and, when comparing its historical volatility, Financiera Independencia SAB is 3.12 times less risky than Vanguard World. The stock trades about -0.13 of its potential returns per unit of risk. The Vanguard World is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  543,063  in Vanguard World on November 28, 2024 and sell it today you would earn a total of  10,737  from holding Vanguard World or generate 1.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Financiera Independencia SAB  vs.  Vanguard World

Financiera Independencia

Risk-Adjusted Performance

Very Weak

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

Vanguard World

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard World are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Vanguard World is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Financiera Independencia and Vanguard World

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

The idea behind Financiera Independencia SAB and Vanguard World 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.