Correlation Between Grupo Sports and Grupo Gigante

Can any of the company-specific risk be diversified away by investing in both Grupo Sports 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 Sports 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 Sports World and Grupo Gigante S, you can compare the effects of market volatilities on Grupo Sports 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 Sports with a short position of Grupo Gigante. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo Sports and Grupo Gigante.

Diversification Opportunities for Grupo Sports and Grupo Gigante

-0.25

Correlation Coefficient

Grupo Sports  Grupo Gigante

Very good diversification

The 3 months correlation between Grupo and Grupo is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Sports World 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 Sports 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 Sports World 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 Sports i.e., Grupo Sports and Grupo Gigante go up and down completely randomly.

Pair Corralation between Grupo Sports and Grupo Gigante

Assuming the 90 days trading horizon Grupo Sports World is expected to generate 1.3 times more return on investment than Grupo Gigante. However, Grupo Sports is 1.3 times more volatile than Grupo Gigante S. It trades about 0.08 of its potential returns per unit of risk. Grupo Gigante S is currently generating about 0.02 per unit of risk. If you would invest  298.00  in Grupo Sports World on October 23, 2024 and sell it today you would earn a total of  302.00  from holding Grupo Sports World or generate 101.34% return on investment over 90 days.

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

Grupo Sports World  vs.  Grupo Gigante S

Grupo Sports World

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Sports World has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Grupo Sports 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

0 of 100

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Grupo Sports and Grupo Gigante

The main advantage of trading using opposite Grupo Sports and Grupo Gigante positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Sports 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 Sports World 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.