Correlation Between Grupo Simec and Grupo Hotelero

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

Diversification Opportunities for Grupo Simec and Grupo Hotelero

-0.17

Correlation Coefficient

Grupo Simec  Grupo Hotelero

Good diversification

The 3 months correlation between Grupo and Grupo is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Simec SAB and Grupo Hotelero Santa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Hotelero Santa 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 Grupo Hotelero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Hotelero Santa has no effect on the direction of Grupo Simec i.e., Grupo Simec and Grupo Hotelero go up and down completely randomly.

Pair Corralation between Grupo Simec and Grupo Hotelero

Assuming the 90 days trading horizon Grupo Simec SAB is expected to generate 0.04 times more return on investment than Grupo Hotelero. However, Grupo Simec SAB is 22.73 times less risky than Grupo Hotelero. It trades about -0.12 of its potential returns per unit of risk. Grupo Hotelero Santa is currently generating about -0.04 per unit of risk. If you would invest  18,500  in Grupo Simec SAB on October 4, 2024 and sell it today you would lose (50.00) from holding Grupo Simec SAB or give up 0.27% of portfolio value over 90 days.

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

Grupo Simec SAB  vs.  Grupo Hotelero Santa

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. Despite somewhat strong primary indicators, Grupo Simec is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Grupo Hotelero Santa

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Hotelero Santa are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Grupo Hotelero may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Grupo Simec and Grupo Hotelero

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

The idea behind Grupo Simec SAB and Grupo Hotelero Santa 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.