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

0.68

Correlation Coefficient

Transportadora  Grupo Financiero

Poor diversification

The 3 months correlation between Transportadora and Grupo is 0.68. 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

Assuming the 90 days trading horizon Transportadora de Gas is expected to generate 1.16 times more return on investment than Grupo Financiero. However, Transportadora is 1.16 times more volatile than Grupo Financiero Galicia. It trades about 0.18 of its potential returns per unit of risk. Grupo Financiero Galicia is currently generating about 0.16 per unit of risk. If you would invest  508,000  in Transportadora de Gas on September 1, 2024 and sell it today you would earn a total of  152,000  from holding Transportadora de Gas or generate 29.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Transportadora de Gas  vs.  Grupo Financiero Galicia

Transportadora de Gas

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Transportadora de Gas are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Transportadora sustained solid returns over the last few months and may actually be approaching a breakup point.

Grupo Financiero Galicia

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Financiero Galicia are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Grupo Financiero sustained solid returns over the last few months and may actually be approaching a breakup point.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.