Correlation Between Alfa SAB and Grupo Cementos

Can any of the company-specific risk be diversified away by investing in both Alfa SAB and Grupo Cementos 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 Cementos 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 Cementos de, you can compare the effects of market volatilities on Alfa SAB and Grupo Cementos 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 Cementos. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alfa SAB and Grupo Cementos.

Diversification Opportunities for Alfa SAB and Grupo Cementos

0.57

Correlation Coefficient

Alfa SAB  Grupo Cementos

Very weak diversification

The 3 months correlation between Alfa and Grupo is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Alfa SAB de and Grupo Cementos de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Cementos de 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 Cementos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Cementos de has no effect on the direction of Alfa SAB i.e., Alfa SAB and Grupo Cementos go up and down completely randomly.

Pair Corralation between Alfa SAB and Grupo Cementos

Assuming the 90 days trading horizon Alfa SAB is expected to generate 1.13 times less return on investment than Grupo Cementos. In addition to that, Alfa SAB is 1.05 times more volatile than Grupo Cementos de. It trades about 0.04 of its total potential returns per unit of risk. Grupo Cementos de is currently generating about 0.04 per unit of volatility. If you would invest  13,563  in Grupo Cementos de on September 26, 2024 and sell it today you would earn a total of  4,889  from holding Grupo Cementos de or generate 36.05% return on investment over 90 days.

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

Alfa SAB de  vs.  Grupo Cementos de

Alfa SAB de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alfa SAB de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Alfa SAB is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Grupo Cementos de

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Cementos de are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Grupo Cementos showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alfa SAB and Grupo Cementos

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

The idea behind Alfa SAB de and Grupo Cementos de 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.