Correlation Between Grupo Financiero and CITIC

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

By analyzing existing cross correlation between Grupo Financiero Inbursa and CITIC Limited, you can compare the effects of market volatilities on Grupo Financiero and CITIC 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 CITIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo Financiero and CITIC.

Diversification Opportunities for Grupo Financiero and CITIC

0.01

Correlation Coefficient

Grupo Financiero  CITIC

Significant diversification

The 3 months correlation between Grupo and CITIC is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Financiero Inbursa and CITIC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Limited 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 Inbursa are associated (or correlated) with CITIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Limited has no effect on the direction of Grupo Financiero i.e., Grupo Financiero and CITIC go up and down completely randomly.

Pair Corralation between Grupo Financiero and CITIC

Assuming the 90 days horizon Grupo Financiero Inbursa is expected to under-perform the CITIC. In addition to that, Grupo Financiero is 1.21 times more volatile than CITIC Limited. It trades about -0.18 of its total potential returns per unit of risk. CITIC Limited is currently generating about -0.22 per unit of volatility. If you would invest  120.00  in CITIC Limited on September 5, 2024 and sell it today you would lose (10.00) from holding CITIC Limited or give up 8.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Grupo Financiero Inbursa  vs.  CITIC Limited

Grupo Financiero Inbursa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Financiero Inbursa has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

CITIC Limited

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Grupo Financiero and CITIC

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

The idea behind Grupo Financiero Inbursa and CITIC Limited 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.