Correlation Between Grupo Catalana and Iberpapel Gestion

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

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

Diversification Opportunities for Grupo Catalana and Iberpapel Gestion

0.3

Correlation Coefficient

Grupo Catalana  Iberpapel Gestion

Weak diversification

The 3 months correlation between Grupo and Iberpapel is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Catalana Occidente and Iberpapel Gestion SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iberpapel Gestion and Grupo Catalana 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 Catalana Occidente are associated (or correlated) with Iberpapel Gestion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iberpapel Gestion has no effect on the direction of Grupo Catalana i.e., Grupo Catalana and Iberpapel Gestion go up and down completely randomly.

Pair Corralation between Grupo Catalana and Iberpapel Gestion

Assuming the 90 days trading horizon Grupo Catalana is expected to generate 1.6 times less return on investment than Iberpapel Gestion. But when comparing it to its historical volatility, Grupo Catalana Occidente is 1.09 times less risky than Iberpapel Gestion. It trades about 0.03 of its potential returns per unit of risk. Iberpapel Gestion SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,815  in Iberpapel Gestion SA on October 26, 2024 and sell it today you would earn a total of  45.00  from holding Iberpapel Gestion SA or generate 2.48% return on investment over 90 days.

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

Grupo Catalana Occidente  vs.  Iberpapel Gestion SA

Grupo Catalana Occidente

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Catalana Occidente are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Grupo Catalana is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Iberpapel Gestion

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Iberpapel Gestion SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Iberpapel Gestion is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Grupo Catalana and Iberpapel Gestion

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

The idea behind Grupo Catalana Occidente and Iberpapel Gestion 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.