Correlation Between Grupo Hotelero and Prudential Financial

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

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

Diversification Opportunities for Grupo Hotelero and Prudential Financial

0.42

Correlation Coefficient

Grupo Hotelero  Prudential Financial

Very weak diversification

The 3 months correlation between Grupo and Prudential is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Hotelero Santa and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial and Grupo Hotelero 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 Hotelero Santa are associated (or correlated) with Prudential Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Financial has no effect on the direction of Grupo Hotelero i.e., Grupo Hotelero and Prudential Financial go up and down completely randomly.

Pair Corralation between Grupo Hotelero and Prudential Financial

Assuming the 90 days trading horizon Grupo Hotelero Santa is expected to generate 13.31 times more return on investment than Prudential Financial. However, Grupo Hotelero is 13.31 times more volatile than Prudential Financial. It trades about 0.02 of its potential returns per unit of risk. Prudential Financial is currently generating about 0.13 per unit of risk. If you would invest  357.00  in Grupo Hotelero Santa on September 13, 2024 and sell it today you would earn a total of  3.00  from holding Grupo Hotelero Santa or generate 0.84% return on investment over 90 days.

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

Grupo Hotelero Santa  vs.  Prudential Financial

Grupo Hotelero Santa

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Hotelero Santa are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Grupo Hotelero is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Prudential Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Financial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Prudential Financial 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 Hotelero and Prudential Financial

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

The idea behind Grupo Hotelero Santa and Prudential Financial 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.