Correlation Between Grupo Hotelero and FibroGen

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

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

Diversification Opportunities for Grupo Hotelero and FibroGen

0.11

Correlation Coefficient

Grupo Hotelero  FibroGen

Average diversification

The 3 months correlation between Grupo and FibroGen is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Hotelero Santa and FibroGen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FibroGen and Grupo Hotelero 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 Hotelero Santa are associated (or correlated) with FibroGen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FibroGen has no effect on the direction of Grupo Hotelero i.e., Grupo Hotelero and FibroGen go up and down completely randomly.

Pair Corralation between Grupo Hotelero and FibroGen

Assuming the 90 days trading horizon Grupo Hotelero is expected to generate 71.45 times less return on investment than FibroGen. But when comparing it to its historical volatility, Grupo Hotelero Santa is 4.76 times less risky than FibroGen. It trades about 0.0 of its potential returns per unit of risk. FibroGen is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,508  in FibroGen on October 5, 2024 and sell it today you would lose (313.00) from holding FibroGen or give up 20.76% of portfolio value over 90 days.

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

Grupo Hotelero Santa  vs.  FibroGen

Grupo Hotelero Santa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Hotelero Santa has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Grupo Hotelero is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

FibroGen

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Grupo Hotelero and FibroGen

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

The idea behind Grupo Hotelero Santa and FibroGen 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.