Correlation Between United States and Grupo Financiero

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

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

Diversification Opportunities for United States and Grupo Financiero

-0.15

Correlation Coefficient

United States  Grupo Financiero

Good diversification

The 3 months correlation between United and Grupo is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel 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 United States 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 United States Steel 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 United States i.e., United States and Grupo Financiero go up and down completely randomly.

Pair Corralation between United States and Grupo Financiero

Given the investment horizon of 90 days United States is expected to generate 5.51 times less return on investment than Grupo Financiero. But when comparing it to its historical volatility, United States Steel is 1.26 times less risky than Grupo Financiero. It trades about 0.02 of its potential returns per unit of risk. Grupo Financiero Galicia is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  620,000  in Grupo Financiero Galicia on November 28, 2024 and sell it today you would earn a total of  79,000  from holding Grupo Financiero Galicia or generate 12.74% return on investment over 90 days.

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

United States Steel  vs.  Grupo Financiero Galicia

United States Steel

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, United States is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Grupo Financiero Galicia

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Financiero Galicia are ranked lower than 5 (%) 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 United States and Grupo Financiero

The main advantage of trading using opposite United States and Grupo Financiero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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 United States Steel 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.