Correlation Between Grupo Simec and First Ship

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

Diversification Opportunities for Grupo Simec and First Ship

0.0

Correlation Coefficient

Grupo Simec  First Ship

Pay attention - limited upside

The 3 months correlation between Grupo and First is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Simec SAB and First Ship Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Ship Lease 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 First Ship. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Ship Lease has no effect on the direction of Grupo Simec i.e., Grupo Simec and First Ship go up and down completely randomly.

Pair Corralation between Grupo Simec and First Ship

Considering the 90-day investment horizon Grupo Simec is expected to generate 18.62 times less return on investment than First Ship. In addition to that, Grupo Simec is 1.27 times more volatile than First Ship Lease. It trades about 0.0 of its total potential returns per unit of risk. First Ship Lease is currently generating about 0.04 per unit of volatility. If you would invest  2.50  in First Ship Lease on September 19, 2024 and sell it today you would earn a total of  1.50  from holding First Ship Lease or generate 60.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	88.51%
Values	Daily Returns

Grupo Simec SAB  vs.  First Ship Lease

Grupo Simec SAB

Risk-Adjusted Performance

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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 recent stock price disarray, may contribute to short-term losses for the investors.

First Ship Lease

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Ship Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, First Ship is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Grupo Simec and First Ship

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

The idea behind Grupo Simec SAB and First Ship Lease 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.