Correlation Between Grupo Financiero and Empresa Distribuidora

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

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

Diversification Opportunities for Grupo Financiero and Empresa Distribuidora

-0.1

Correlation Coefficient

Grupo Financiero  Empresa Distribuidora

Good diversification

The 3 months correlation between Grupo and Empresa is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Financiero Galicia and Empresa Distribuidora y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empresa Distribuidora and Grupo Financiero 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 Grupo Financiero Galicia are associated (or correlated) with Empresa Distribuidora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empresa Distribuidora has no effect on the direction of Grupo Financiero i.e., Grupo Financiero and Empresa Distribuidora go up and down completely randomly.

Pair Corralation between Grupo Financiero and Empresa Distribuidora

Assuming the 90 days trading horizon Grupo Financiero Galicia is expected to generate 0.98 times more return on investment than Empresa Distribuidora. However, Grupo Financiero Galicia is 1.02 times less risky than Empresa Distribuidora. It trades about 0.45 of its potential returns per unit of risk. Empresa Distribuidora y is currently generating about 0.06 per unit of risk. If you would invest  287,240  in Grupo Financiero Galicia on February 5, 2024 and sell it today you would earn a total of  97,655  from holding Grupo Financiero Galicia or generate 34.0% return on investment over 90 days.

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

Grupo Financiero Galicia  vs.  Empresa Distribuidora y

Grupo Financiero Galicia

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Financiero Galicia are ranked lower than 15 (%) 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.

Empresa Distribuidora

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Empresa Distribuidora y has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Grupo Financiero and Empresa Distribuidora

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

The idea behind Grupo Financiero Galicia and Empresa Distribuidora y 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.