Correlation Between Grupo KUO and Grupo Gigante

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

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

Diversification Opportunities for Grupo KUO and Grupo Gigante

-0.03

Correlation Coefficient

Grupo KUO  Grupo Gigante

Good diversification

The 3 months correlation between Grupo and Grupo is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Grupo KUO SAB and Grupo Gigante S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Gigante S and Grupo KUO 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 KUO SAB are associated (or correlated) with Grupo Gigante. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Gigante S has no effect on the direction of Grupo KUO i.e., Grupo KUO and Grupo Gigante go up and down completely randomly.

Pair Corralation between Grupo KUO and Grupo Gigante

Assuming the 90 days trading horizon Grupo KUO SAB is expected to generate 1.35 times more return on investment than Grupo Gigante. However, Grupo KUO is 1.35 times more volatile than Grupo Gigante S. It trades about -0.01 of its potential returns per unit of risk. Grupo Gigante S is currently generating about -0.06 per unit of risk. If you would invest  4,055  in Grupo KUO SAB on December 28, 2024 and sell it today you would lose (55.00) from holding Grupo KUO SAB or give up 1.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Grupo KUO SAB  vs.  Grupo Gigante S

Grupo KUO SAB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grupo KUO SAB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Grupo KUO is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Grupo Gigante S

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Grupo KUO and Grupo Gigante

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

The idea behind Grupo KUO SAB and Grupo Gigante S 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.