Correlation Between Grupo Financiero and Agro Capital

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

By analyzing existing cross correlation between Grupo Financiero Inbursa and Agro Capital Management, you can compare the effects of market volatilities on Grupo Financiero and Agro Capital 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 Financiero with a short position of Agro Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo Financiero and Agro Capital.

Diversification Opportunities for Grupo Financiero and Agro Capital

-0.36

Correlation Coefficient

Grupo Financiero  Agro Capital

Very good diversification

The 3 months correlation between Grupo and Agro is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Financiero Inbursa and Agro Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agro Capital Management and Grupo Financiero 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 Financiero Inbursa are associated (or correlated) with Agro Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agro Capital Management has no effect on the direction of Grupo Financiero i.e., Grupo Financiero and Agro Capital go up and down completely randomly.

Pair Corralation between Grupo Financiero and Agro Capital

Assuming the 90 days horizon Grupo Financiero Inbursa is expected to under-perform the Agro Capital. But the pink sheet apears to be less risky and, when comparing its historical volatility, Grupo Financiero Inbursa is 10.53 times less risky than Agro Capital. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Agro Capital Management is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1.39  in Agro Capital Management on September 3, 2024 and sell it today you would earn a total of  0.84  from holding Agro Capital Management or generate 60.43% return on investment over 90 days.

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

Grupo Financiero Inbursa  vs.  Agro Capital Management

Grupo Financiero Inbursa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Financiero Inbursa has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Agro Capital Management

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Grupo Financiero and Agro Capital

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

The idea behind Grupo Financiero Inbursa and Agro Capital Management 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.