Correlation Between Central Puerto and Grupo Financiero

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

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

Diversification Opportunities for Central Puerto and Grupo Financiero

0.81

Correlation Coefficient

Central Puerto  Grupo Financiero

Very poor diversification

The 3 months correlation between Central and Grupo is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Central Puerto SA and Grupo Financiero Galicia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Financiero Galicia and Central Puerto 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 Central Puerto SA 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 Galicia has no effect on the direction of Central Puerto i.e., Central Puerto and Grupo Financiero go up and down completely randomly.

Pair Corralation between Central Puerto and Grupo Financiero

Assuming the 90 days trading horizon Central Puerto SA is expected to generate 1.1 times more return on investment than Grupo Financiero. However, Central Puerto is 1.1 times more volatile than Grupo Financiero Galicia. It trades about 0.18 of its potential returns per unit of risk. Grupo Financiero Galicia is currently generating about 0.16 per unit of risk. If you would invest  130,500  in Central Puerto SA on September 16, 2024 and sell it today you would earn a total of  37,000  from holding Central Puerto SA or generate 28.35% return on investment over 90 days.

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

Central Puerto SA  vs.  Grupo Financiero Galicia

Central Puerto SA

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Central Puerto SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Central Puerto sustained solid returns over the last few months and may actually be approaching a breakup point.

Grupo Financiero Galicia

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Financiero Galicia are ranked lower than 12 (%) 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.

Pair Trading with Central Puerto and Grupo Financiero

The main advantage of trading using opposite Central Puerto and Grupo Financiero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Puerto 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 Central Puerto SA and Grupo Financiero Galicia 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.