Correlation Between Gestamp Automocion and Talgo SA

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

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

Diversification Opportunities for Gestamp Automocion and Talgo SA

0.34

Correlation Coefficient

Gestamp Automocion  Talgo SA

Weak diversification

The 3 months correlation between Gestamp and Talgo is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Gestamp Automocion SA and Talgo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talgo SA and Gestamp Automocion 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 Gestamp Automocion SA are associated (or correlated) with Talgo SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talgo SA has no effect on the direction of Gestamp Automocion i.e., Gestamp Automocion and Talgo SA go up and down completely randomly.

Pair Corralation between Gestamp Automocion and Talgo SA

Assuming the 90 days trading horizon Gestamp Automocion SA is expected to under-perform the Talgo SA. In addition to that, Gestamp Automocion is 1.69 times more volatile than Talgo SA. It trades about -0.24 of its total potential returns per unit of risk. Talgo SA is currently generating about -0.24 per unit of volatility. If you would invest  354.00  in Talgo SA on October 12, 2024 and sell it today you would lose (15.00) from holding Talgo SA or give up 4.24% of portfolio value over 90 days.

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

Gestamp Automocion SA  vs.  Talgo SA

Gestamp Automocion

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gestamp Automocion SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Talgo SA

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Gestamp Automocion and Talgo SA

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

The idea behind Gestamp Automocion SA and Talgo 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.