Correlation Between Grupo Gigante and Grupo KUO

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

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

Diversification Opportunities for Grupo Gigante and Grupo KUO

0.45

Correlation Coefficient

Grupo Gigante  Grupo KUO

Very weak diversification

The 3 months correlation between Grupo and Grupo is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Gigante S and Grupo KUO SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo KUO SAB and Grupo Gigante 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 Gigante S are associated (or correlated) with Grupo KUO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo KUO SAB has no effect on the direction of Grupo Gigante i.e., Grupo Gigante and Grupo KUO go up and down completely randomly.

Pair Corralation between Grupo Gigante and Grupo KUO

Assuming the 90 days trading horizon Grupo Gigante is expected to generate 10.26 times less return on investment than Grupo KUO. But when comparing it to its historical volatility, Grupo Gigante S is 1.21 times less risky than Grupo KUO. It trades about 0.01 of its potential returns per unit of risk. Grupo KUO SAB is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,199  in Grupo KUO SAB on September 23, 2024 and sell it today you would earn a total of  201.00  from holding Grupo KUO SAB or generate 4.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.62%
Values	Daily Returns

Grupo Gigante S  vs.  Grupo KUO SAB

Grupo Gigante S

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Gigante S are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Grupo Gigante exhibited solid returns over the last few months and may actually be approaching a breakup point.

Grupo KUO SAB

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo KUO SAB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Grupo KUO is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Grupo Gigante and Grupo KUO

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

The idea behind Grupo Gigante S and Grupo KUO SAB 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.