Correlation Between Promotora and Grupo Financiero

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

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

Diversification Opportunities for Promotora and Grupo Financiero

0.62

Correlation Coefficient

Promotora  Grupo Financiero

Poor diversification

The 3 months correlation between Promotora and Grupo is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Promotora y Operadora and Grupo Financiero Inbursa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Financiero Inbursa and Promotora 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 Promotora y Operadora 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 Inbursa has no effect on the direction of Promotora i.e., Promotora and Grupo Financiero go up and down completely randomly.

Pair Corralation between Promotora and Grupo Financiero

Assuming the 90 days trading horizon Promotora y Operadora is expected to generate 1.28 times more return on investment than Grupo Financiero. However, Promotora is 1.28 times more volatile than Grupo Financiero Inbursa. It trades about -0.03 of its potential returns per unit of risk. Grupo Financiero Inbursa is currently generating about -0.1 per unit of risk. If you would invest  17,761  in Promotora y Operadora on January 31, 2024 and sell it today you would lose (328.00) from holding Promotora y Operadora or give up 1.85% of portfolio value over 90 days.

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

Promotora y Operadora  vs.  Grupo Financiero Inbursa

Promotora y Operadora

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Promotora y Operadora are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Promotora is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Grupo Financiero Inbursa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Financiero Inbursa has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Grupo Financiero is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Promotora and Grupo Financiero

The main advantage of trading using opposite Promotora and Grupo Financiero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Promotora 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 Promotora y Operadora and Grupo Financiero Inbursa 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..