Correlation Between Grupo Herdez and Visa

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

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

Diversification Opportunities for Grupo Herdez and Visa

-0.06

Correlation Coefficient

Grupo Herdez  Visa

Good diversification

The 3 months correlation between Grupo and Visa is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Herdez SAB and Visa Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Inc and Grupo Herdez 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 Herdez SAB are associated (or correlated) with Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Inc has no effect on the direction of Grupo Herdez i.e., Grupo Herdez and Visa go up and down completely randomly.

Pair Corralation between Grupo Herdez and Visa

Assuming the 90 days trading horizon Grupo Herdez SAB is expected to generate 2.31 times more return on investment than Visa. However, Grupo Herdez is 2.31 times more volatile than Visa Inc. It trades about 0.05 of its potential returns per unit of risk. Visa Inc is currently generating about 0.07 per unit of risk. If you would invest  5,403  in Grupo Herdez SAB on October 12, 2024 and sell it today you would earn a total of  102.00  from holding Grupo Herdez SAB or generate 1.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Grupo Herdez SAB  vs.  Visa Inc

Grupo Herdez SAB

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Herdez SAB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Grupo Herdez is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Visa Inc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grupo Herdez and Visa

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

The idea behind Grupo Herdez SAB and Visa Inc 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.