Correlation Between Grupo Financiero and BancFirst

Can any of the company-specific risk be diversified away by investing in both Grupo Financiero and BancFirst 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 BancFirst 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 BancFirst, you can compare the effects of market volatilities on Grupo Financiero and BancFirst 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 BancFirst. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo Financiero and BancFirst.

Diversification Opportunities for Grupo Financiero and BancFirst

0.8

Correlation Coefficient

Grupo Financiero  BancFirst

Very poor diversification

The 3 months correlation between Grupo and BancFirst is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Financiero Galicia and BancFirst in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BancFirst 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 BancFirst. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BancFirst has no effect on the direction of Grupo Financiero i.e., Grupo Financiero and BancFirst go up and down completely randomly.

Pair Corralation between Grupo Financiero and BancFirst

Given the investment horizon of 90 days Grupo Financiero Galicia is expected to generate 1.08 times more return on investment than BancFirst. However, Grupo Financiero is 1.08 times more volatile than BancFirst. It trades about 0.24 of its potential returns per unit of risk. BancFirst is currently generating about 0.1 per unit of risk. If you would invest  4,321  in Grupo Financiero Galicia on September 26, 2024 and sell it today you would earn a total of  2,166  from holding Grupo Financiero Galicia or generate 50.13% return on investment over 90 days.

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

Grupo Financiero Galicia  vs.  BancFirst

Grupo Financiero Galicia

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Financiero Galicia are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal basic indicators, Grupo Financiero disclosed solid returns over the last few months and may actually be approaching a breakup point.

BancFirst

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BancFirst are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, BancFirst reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grupo Financiero and BancFirst

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

The idea behind Grupo Financiero Galicia and BancFirst 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.