Correlation Between Transportadora and Grupo Financiero

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

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

Diversification Opportunities for Transportadora and Grupo Financiero

0.48

Correlation Coefficient

Transportadora  Grupo Financiero

Very weak diversification

The 3 months correlation between Transportadora and Grupo is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Transportadora de Gas and Grupo Financiero Galicia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Financiero Galicia and Transportadora 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 Transportadora de Gas 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 Galicia has no effect on the direction of Transportadora i.e., Transportadora and Grupo Financiero go up and down completely randomly.

Pair Corralation between Transportadora and Grupo Financiero

Considering the 90-day investment horizon Transportadora de Gas is expected to under-perform the Grupo Financiero. But the stock apears to be less risky and, when comparing its historical volatility, Transportadora de Gas is 1.15 times less risky than Grupo Financiero. The stock trades about -0.01 of its potential returns per unit of risk. The Grupo Financiero Galicia is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  5,703  in Grupo Financiero Galicia on November 19, 2024 and sell it today you would earn a total of  177.00  from holding Grupo Financiero Galicia or generate 3.1% return on investment over 90 days.

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

Transportadora de Gas  vs.  Grupo Financiero Galicia

Transportadora de Gas

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transportadora de Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Transportadora is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Grupo Financiero Galicia

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Financiero Galicia are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal basic indicators, Grupo Financiero may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Transportadora and Grupo Financiero

The main advantage of trading using opposite Transportadora and Grupo Financiero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transportadora 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 Transportadora de Gas and Grupo Financiero Galicia 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.