Correlation Between Value Grupo and Farmacias Benavides

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

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

Diversification Opportunities for Value Grupo and Farmacias Benavides

0.32

Correlation Coefficient

Value Grupo  Farmacias Benavides

Weak diversification

The 3 months correlation between Value and Farmacias is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Value Grupo Financiero and Farmacias Benavides SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmacias Benavides SAB and Value Grupo 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 Value Grupo Financiero are associated (or correlated) with Farmacias Benavides. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmacias Benavides SAB has no effect on the direction of Value Grupo i.e., Value Grupo and Farmacias Benavides go up and down completely randomly.

Pair Corralation between Value Grupo and Farmacias Benavides

Assuming the 90 days trading horizon Value Grupo is expected to generate 3.25 times less return on investment than Farmacias Benavides. In addition to that, Value Grupo is 2.05 times more volatile than Farmacias Benavides SAB. It trades about 0.01 of its total potential returns per unit of risk. Farmacias Benavides SAB is currently generating about 0.07 per unit of volatility. If you would invest  1,890  in Farmacias Benavides SAB on September 24, 2024 and sell it today you would earn a total of  310.00  from holding Farmacias Benavides SAB or generate 16.4% return on investment over 90 days.

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

Value Grupo Financiero  vs.  Farmacias Benavides SAB

Value Grupo Financiero

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Value Grupo Financiero has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Value Grupo is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Farmacias Benavides SAB

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Value Grupo and Farmacias Benavides

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

The idea behind Value Grupo Financiero and Farmacias Benavides SAB 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.

Check out your portfolio center.

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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.