Correlation Between Grupo Simec and Diageo PLC

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

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

Diversification Opportunities for Grupo Simec and Diageo PLC

0.71

Correlation Coefficient

Grupo Simec  Diageo PLC

Poor diversification

The 3 months correlation between Grupo and Diageo is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Simec SAB and Diageo PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo PLC ADR and Grupo Simec 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 Simec SAB are associated (or correlated) with Diageo PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diageo PLC ADR has no effect on the direction of Grupo Simec i.e., Grupo Simec and Diageo PLC go up and down completely randomly.

Pair Corralation between Grupo Simec and Diageo PLC

Considering the 90-day investment horizon Grupo Simec SAB is expected to generate 1.94 times more return on investment than Diageo PLC. However, Grupo Simec is 1.94 times more volatile than Diageo PLC ADR. It trades about -0.01 of its potential returns per unit of risk. Diageo PLC ADR is currently generating about -0.04 per unit of risk. If you would invest  2,850  in Grupo Simec SAB on September 12, 2024 and sell it today you would lose (94.00) from holding Grupo Simec SAB or give up 3.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	85.94%
Values	Daily Returns

Grupo Simec SAB  vs.  Diageo PLC ADR

Grupo Simec SAB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Diageo PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Grupo Simec and Diageo PLC

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

The idea behind Grupo Simec SAB and Diageo PLC ADR 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.