Correlation Between Gruma SAB and Grupo Financiero

Can any of the company-specific risk be diversified away by investing in both Gruma SAB and Grupo Financiero 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 Grupo Financiero 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 Grupo Financiero Banorte, you can compare the effects of market volatilities on Gruma SAB and Grupo Financiero 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 Grupo Financiero. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gruma SAB and Grupo Financiero.

Diversification Opportunities for Gruma SAB and Grupo Financiero

-0.27

Correlation Coefficient

Gruma SAB  Grupo Financiero

Very good diversification

The 3 months correlation between Gruma and Grupo is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Gruma SAB de and Grupo Financiero Banorte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Financiero Banorte 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 Grupo Financiero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Financiero Banorte has no effect on the direction of Gruma SAB i.e., Gruma SAB and Grupo Financiero go up and down completely randomly.

Pair Corralation between Gruma SAB and Grupo Financiero

Assuming the 90 days trading horizon Gruma SAB de is expected to under-perform the Grupo Financiero. But the stock apears to be less risky and, when comparing its historical volatility, Gruma SAB de is 1.16 times less risky than Grupo Financiero. The stock trades about -0.05 of its potential returns per unit of risk. The Grupo Financiero Banorte is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  13,825  in Grupo Financiero Banorte on September 2, 2024 and sell it today you would lose (292.00) from holding Grupo Financiero Banorte or give up 2.11% of portfolio value over 90 days.

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

Gruma SAB de  vs.  Grupo Financiero Banorte

Gruma SAB de

Risk-Adjusted Performance

0 of 100

Very Weak

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

Grupo Financiero Banorte

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Financiero Banorte has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Grupo Financiero is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Gruma SAB and Grupo Financiero

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

The idea behind Gruma SAB de and Grupo Financiero Banorte 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.