Correlation Between El Puerto and Grupo Financiero

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

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

Diversification Opportunities for El Puerto and Grupo Financiero

0.5

Correlation Coefficient

El Puerto  Grupo Financiero

Very weak diversification

The 3 months correlation between LIVEPOLC-1 and Grupo is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding El Puerto 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 El Puerto 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 El Puerto 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 El Puerto i.e., El Puerto and Grupo Financiero go up and down completely randomly.

Pair Corralation between El Puerto and Grupo Financiero

Assuming the 90 days trading horizon El Puerto de is expected to under-perform the Grupo Financiero. But the stock apears to be less risky and, when comparing its historical volatility, El Puerto de is 1.45 times less risky than Grupo Financiero. The stock trades about -0.09 of its potential returns per unit of risk. The Grupo Financiero Banorte is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  13,850  in Grupo Financiero Banorte on September 12, 2024 and sell it today you would earn a total of  142.00  from holding Grupo Financiero Banorte or generate 1.03% return on investment over 90 days.

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

El Puerto de  vs.  Grupo Financiero Banorte

El Puerto de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days El Puerto de has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Grupo Financiero Banorte

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Financiero Banorte are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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 El Puerto and Grupo Financiero

The main advantage of trading using opposite El Puerto and Grupo Financiero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if El Puerto 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 El Puerto 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 Transaction History module to view history of all your transactions and understand their impact on performance.