Correlation Between Gruma SAB and Arca Continental

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

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

Diversification Opportunities for Gruma SAB and Arca Continental

0.81

Correlation Coefficient

Gruma SAB  Arca Continental

Very poor diversification

The 3 months correlation between Gruma and Arca is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Gruma SAB de and Arca Continental SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arca Continental SAB and Gruma 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 Gruma SAB de are associated (or correlated) with Arca Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arca Continental SAB has no effect on the direction of Gruma SAB i.e., Gruma SAB and Arca Continental go up and down completely randomly.

Pair Corralation between Gruma SAB and Arca Continental

Assuming the 90 days trading horizon Gruma SAB de is expected to generate 1.07 times more return on investment than Arca Continental. However, Gruma SAB is 1.07 times more volatile than Arca Continental SAB. It trades about 0.05 of its potential returns per unit of risk. Arca Continental SAB is currently generating about 0.05 per unit of risk. If you would invest  25,362  in Gruma SAB de on December 5, 2024 and sell it today you would earn a total of  10,772  from holding Gruma SAB de or generate 42.47% return on investment over 90 days.

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

Gruma SAB de  vs.  Arca Continental SAB

Gruma SAB de

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gruma SAB de are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Gruma SAB may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Arca Continental SAB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arca Continental SAB are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Arca Continental showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gruma SAB and Arca Continental

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

The idea behind Gruma SAB de and Arca Continental 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.

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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.