Correlation Between General De and Grupo Ezentis

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

By analyzing existing cross correlation between General de Alquiler and Grupo Ezentis SA, you can compare the effects of market volatilities on General De and Grupo Ezentis 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 General De with a short position of Grupo Ezentis. Check out your portfolio center. Please also check ongoing floating volatility patterns of General De and Grupo Ezentis.

Diversification Opportunities for General De and Grupo Ezentis

0.53

Correlation Coefficient

General De  Grupo Ezentis

Very weak diversification

The 3 months correlation between General and Grupo is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding General de Alquiler and Grupo Ezentis SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Ezentis SA and General De 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 General de Alquiler are associated (or correlated) with Grupo Ezentis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Ezentis SA has no effect on the direction of General De i.e., General De and Grupo Ezentis go up and down completely randomly.

Pair Corralation between General De and Grupo Ezentis

Assuming the 90 days trading horizon General De is expected to generate 22.52 times less return on investment than Grupo Ezentis. But when comparing it to its historical volatility, General de Alquiler is 2.66 times less risky than Grupo Ezentis. It trades about 0.02 of its potential returns per unit of risk. Grupo Ezentis SA is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  8.80  in Grupo Ezentis SA on December 30, 2024 and sell it today you would earn a total of  3.20  from holding Grupo Ezentis SA or generate 36.36% return on investment over 90 days.

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

General de Alquiler  vs.  Grupo Ezentis SA

General de Alquiler

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in General de Alquiler are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, General De is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Grupo Ezentis SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Ezentis SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Grupo Ezentis exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with General De and Grupo Ezentis

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

The idea behind General de Alquiler and Grupo Ezentis SA 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.