Correlation Between Construcciones and Grupo Catalana

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

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

Diversification Opportunities for Construcciones and Grupo Catalana

0.38

Correlation Coefficient

Construcciones  Grupo Catalana

Weak diversification

The 3 months correlation between Construcciones and Grupo is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Construcciones y Auxiliar and Grupo Catalana Occidente in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Catalana Occidente and Construcciones 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 Construcciones y Auxiliar are associated (or correlated) with Grupo Catalana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Catalana Occidente has no effect on the direction of Construcciones i.e., Construcciones and Grupo Catalana go up and down completely randomly.

Pair Corralation between Construcciones and Grupo Catalana

Assuming the 90 days trading horizon Construcciones y Auxiliar is expected to generate 1.55 times more return on investment than Grupo Catalana. However, Construcciones is 1.55 times more volatile than Grupo Catalana Occidente. It trades about 0.03 of its potential returns per unit of risk. Grupo Catalana Occidente is currently generating about -0.08 per unit of risk. If you would invest  3,365  in Construcciones y Auxiliar on September 12, 2024 and sell it today you would earn a total of  55.00  from holding Construcciones y Auxiliar or generate 1.63% return on investment over 90 days.

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

Construcciones y Auxiliar  vs.  Grupo Catalana Occidente

Construcciones y Auxiliar

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Construcciones y Auxiliar are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Construcciones is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Grupo Catalana Occidente

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Catalana Occidente has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Grupo Catalana is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Construcciones and Grupo Catalana

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

The idea behind Construcciones y Auxiliar and Grupo Catalana Occidente 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.