Correlation Between Gentera SAB and FibraHotel

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

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

Diversification Opportunities for Gentera SAB and FibraHotel

-0.37

Correlation Coefficient

Gentera SAB  FibraHotel

Very good diversification

The 3 months correlation between Gentera and FibraHotel is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Gentera SAB de and FibraHotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FibraHotel and Gentera SAB 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 Gentera SAB de are associated (or correlated) with FibraHotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FibraHotel has no effect on the direction of Gentera SAB i.e., Gentera SAB and FibraHotel go up and down completely randomly.

Pair Corralation between Gentera SAB and FibraHotel

Assuming the 90 days trading horizon Gentera SAB de is expected to under-perform the FibraHotel. But the stock apears to be less risky and, when comparing its historical volatility, Gentera SAB de is 1.72 times less risky than FibraHotel. The stock trades about -0.02 of its potential returns per unit of risk. The FibraHotel is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  794.00  in FibraHotel on October 14, 2024 and sell it today you would earn a total of  216.00  from holding FibraHotel or generate 27.2% return on investment over 90 days.

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

Gentera SAB de  vs.  FibraHotel

Gentera SAB de

Risk-Adjusted Performance

0 of 100

Very Weak

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

FibraHotel

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FibraHotel are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, FibraHotel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gentera SAB and FibraHotel

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

The idea behind Gentera SAB de and FibraHotel 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.