Correlation Between Grupo Hotelero and Kimberly Clark

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

Diversification Opportunities for Grupo Hotelero and Kimberly Clark

-0.58

Correlation Coefficient

Grupo Hotelero  Kimberly Clark

Excellent diversification

The 3 months correlation between Grupo and Kimberly is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Hotelero Santa and Kimberly Clark de Mxico in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimberly Clark de 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 Kimberly Clark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimberly Clark de has no effect on the direction of Grupo Hotelero i.e., Grupo Hotelero and Kimberly Clark go up and down completely randomly.

Pair Corralation between Grupo Hotelero and Kimberly Clark

Assuming the 90 days trading horizon Grupo Hotelero Santa is expected to generate 1.38 times more return on investment than Kimberly Clark. However, Grupo Hotelero is 1.38 times more volatile than Kimberly Clark de Mxico. It trades about 0.0 of its potential returns per unit of risk. Kimberly Clark de Mxico is currently generating about -0.02 per unit of risk. If you would invest  400.00  in Grupo Hotelero Santa on October 5, 2024 and sell it today you would lose (17.00) from holding Grupo Hotelero Santa or give up 4.25% of portfolio value over 90 days.

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

Grupo Hotelero Santa  vs.  Kimberly Clark de Mxico

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.

Kimberly Clark de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kimberly Clark de Mxico has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Grupo Hotelero and Kimberly Clark

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

The idea behind Grupo Hotelero Santa and Kimberly Clark de Mxico 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.