Correlation Between Grimoldi and Compania

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

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

Diversification Opportunities for Grimoldi and Compania

0.16

Correlation Coefficient

Grimoldi  Compania

Average diversification

The 3 months correlation between Grimoldi and Compania is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Grimoldi SA and Compania de Transporte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania de Transporte and Grimoldi 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 Grimoldi SA are associated (or correlated) with Compania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania de Transporte has no effect on the direction of Grimoldi i.e., Grimoldi and Compania go up and down completely randomly.

Pair Corralation between Grimoldi and Compania

Assuming the 90 days trading horizon Grimoldi is expected to generate 1.36 times less return on investment than Compania. But when comparing it to its historical volatility, Grimoldi SA is 1.27 times less risky than Compania. It trades about 0.14 of its potential returns per unit of risk. Compania de Transporte is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  17,325  in Compania de Transporte on September 14, 2024 and sell it today you would earn a total of  217,175  from holding Compania de Transporte or generate 1253.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Grimoldi SA  vs.  Compania de Transporte

Grimoldi SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grimoldi SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Grimoldi may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Compania de Transporte

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Compania de Transporte are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Compania sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grimoldi and Compania

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

The idea behind Grimoldi SA and Compania de Transporte 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.