Correlation Between Grupo Carso and Banco Bilbao

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

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

Diversification Opportunities for Grupo Carso and Banco Bilbao

0.41

Correlation Coefficient

Grupo Carso  Banco Bilbao

Very weak diversification

The 3 months correlation between Grupo and Banco is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Carso SAB and Banco Bilbao Vizcaya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Bilbao Vizcaya and Grupo Carso 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 Grupo Carso SAB are associated (or correlated) with Banco Bilbao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Bilbao Vizcaya has no effect on the direction of Grupo Carso i.e., Grupo Carso and Banco Bilbao go up and down completely randomly.

Pair Corralation between Grupo Carso and Banco Bilbao

Assuming the 90 days trading horizon Grupo Carso is expected to generate 1.75 times less return on investment than Banco Bilbao. In addition to that, Grupo Carso is 1.23 times more volatile than Banco Bilbao Vizcaya. It trades about 0.03 of its total potential returns per unit of risk. Banco Bilbao Vizcaya is currently generating about 0.07 per unit of volatility. If you would invest  11,696  in Banco Bilbao Vizcaya on September 12, 2024 and sell it today you would earn a total of  8,304  from holding Banco Bilbao Vizcaya or generate 71.0% return on investment over 90 days.

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

Grupo Carso SAB  vs.  Banco Bilbao Vizcaya

Grupo Carso SAB

Risk-Adjusted Performance

0 of 100

Weak

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

Banco Bilbao Vizcaya

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Bilbao Vizcaya are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Banco Bilbao may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Grupo Carso and Banco Bilbao

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

The idea behind Grupo Carso SAB and Banco Bilbao Vizcaya 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.