Correlation Between Grupo Carso and Palo Alto

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

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

Diversification Opportunities for Grupo Carso and Palo Alto

-0.15

Correlation Coefficient

Grupo Carso  Palo Alto

Good diversification

The 3 months correlation between Grupo and Palo is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Carso SAB and Palo Alto Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palo Alto Networks and Grupo Carso 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 Grupo Carso SAB are associated (or correlated) with Palo Alto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palo Alto Networks has no effect on the direction of Grupo Carso i.e., Grupo Carso and Palo Alto go up and down completely randomly.

Pair Corralation between Grupo Carso and Palo Alto

Assuming the 90 days trading horizon Grupo Carso is expected to generate 56.17 times less return on investment than Palo Alto. But when comparing it to its historical volatility, Grupo Carso SAB is 1.04 times less risky than Palo Alto. It trades about 0.0 of its potential returns per unit of risk. Palo Alto Networks is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  320,315  in Palo Alto Networks on September 18, 2024 and sell it today you would earn a total of  83,685  from holding Palo Alto Networks or generate 26.13% return on investment over 90 days.

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

Grupo Carso SAB  vs.  Palo Alto Networks

Grupo Carso SAB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Palo Alto Networks

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Palo Alto Networks are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Palo Alto showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grupo Carso and Palo Alto

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

The idea behind Grupo Carso SAB and Palo Alto Networks 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.