Correlation Between Consultatio and Grupo Financiero

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

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

Diversification Opportunities for Consultatio and Grupo Financiero

0.38

Correlation Coefficient

Consultatio  Grupo Financiero

Weak diversification

The 3 months correlation between Consultatio and Grupo is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Consultatio 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 Consultatio 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 Consultatio 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 Consultatio i.e., Consultatio and Grupo Financiero go up and down completely randomly.

Pair Corralation between Consultatio and Grupo Financiero

Assuming the 90 days trading horizon Consultatio SA is expected to under-perform the Grupo Financiero. In addition to that, Consultatio is 1.4 times more volatile than Grupo Financiero Galicia. It trades about 0.0 of its total potential returns per unit of risk. Grupo Financiero Galicia is currently generating about 0.16 per unit of volatility. If you would invest  552,000  in Grupo Financiero Galicia on September 16, 2024 and sell it today you would earn a total of  124,000  from holding Grupo Financiero Galicia or generate 22.46% return on investment over 90 days.

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

Consultatio SA  vs.  Grupo Financiero Galicia

Consultatio SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Consultatio SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Consultatio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 Consultatio and Grupo Financiero

The main advantage of trading using opposite Consultatio and Grupo Financiero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consultatio 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 Consultatio 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..