Correlation Between Compania and Grimoldi

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

By analyzing existing cross correlation between Compania de Transporte and Grimoldi SA, you can compare the effects of market volatilities on Compania and Grimoldi 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 Compania with a short position of Grimoldi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compania and Grimoldi.

Diversification Opportunities for Compania and Grimoldi

0.85

Correlation Coefficient

Compania  Grimoldi

Very poor diversification

The 3 months correlation between Compania and Grimoldi is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Transporte and Grimoldi SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grimoldi SA and Compania 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 Compania de Transporte are associated (or correlated) with Grimoldi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grimoldi SA has no effect on the direction of Compania i.e., Compania and Grimoldi go up and down completely randomly.

Pair Corralation between Compania and Grimoldi

Assuming the 90 days trading horizon Compania de Transporte is expected to generate 2.28 times more return on investment than Grimoldi. However, Compania is 2.28 times more volatile than Grimoldi SA. It trades about 0.26 of its potential returns per unit of risk. Grimoldi SA is currently generating about 0.19 per unit of risk. If you would invest  230,000  in Compania de Transporte on October 11, 2024 and sell it today you would earn a total of  65,500  from holding Compania de Transporte or generate 28.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.0%
Values	Daily Returns

Compania de Transporte  vs.  Grimoldi SA

Compania de Transporte

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Compania de Transporte are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Compania sustained solid returns over the last few months and may actually be approaching a breakup point.

Grimoldi SA

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with Compania and Grimoldi

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

The idea behind Compania de Transporte and Grimoldi SA 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.