Correlation Between Grupo Financiero and Consultatio

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

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

Diversification Opportunities for Grupo Financiero and Consultatio

0.38

Correlation Coefficient

Grupo Financiero  Consultatio

Weak diversification

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

Pair Corralation between Grupo Financiero and Consultatio

Assuming the 90 days trading horizon Grupo Financiero Galicia is expected to generate 0.71 times more return on investment than Consultatio. However, Grupo Financiero Galicia is 1.4 times less risky than Consultatio. It trades about 0.16 of its potential returns per unit of risk. Consultatio SA is currently generating about 0.0 per unit of risk. 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

Grupo Financiero Galicia  vs.  Consultatio SA

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.

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.

Pair Trading with Grupo Financiero and Consultatio

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

The idea behind Grupo Financiero Galicia and Consultatio SA 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.