Correlation Between Alfa SAB and Grupo Bimbo

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

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

Diversification Opportunities for Alfa SAB and Grupo Bimbo

-0.42

Correlation Coefficient

Alfa SAB  Grupo Bimbo

Very good diversification

The 3 months correlation between Alfa and Grupo is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Alfa SAB de and Grupo Bimbo SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Bimbo SAB and Alfa SAB 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 Alfa SAB de are associated (or correlated) with Grupo Bimbo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Bimbo SAB has no effect on the direction of Alfa SAB i.e., Alfa SAB and Grupo Bimbo go up and down completely randomly.

Pair Corralation between Alfa SAB and Grupo Bimbo

Assuming the 90 days trading horizon Alfa SAB de is expected to generate 1.81 times more return on investment than Grupo Bimbo. However, Alfa SAB is 1.81 times more volatile than Grupo Bimbo SAB. It trades about 0.21 of its potential returns per unit of risk. Grupo Bimbo SAB is currently generating about -0.13 per unit of risk. If you would invest  1,095  in Alfa SAB de on September 4, 2024 and sell it today you would earn a total of  515.00  from holding Alfa SAB de or generate 47.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Alfa SAB de  vs.  Grupo Bimbo SAB

Alfa SAB de

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa SAB de are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Alfa SAB displayed solid returns over the last few months and may actually be approaching a breakup point.

Grupo Bimbo SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Bimbo SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Alfa SAB and Grupo Bimbo

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

The idea behind Alfa SAB de and Grupo Bimbo 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.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.