Correlation Between Iberpapel Gestion and Grupo Catalana

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

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

Diversification Opportunities for Iberpapel Gestion and Grupo Catalana

-0.57

Correlation Coefficient

Iberpapel Gestion  Grupo Catalana

Excellent diversification

The 3 months correlation between Iberpapel and Grupo is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Iberpapel Gestion SA and Grupo Catalana Occidente in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Catalana Occidente and Iberpapel Gestion 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 Iberpapel Gestion SA are associated (or correlated) with Grupo Catalana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Catalana Occidente has no effect on the direction of Iberpapel Gestion i.e., Iberpapel Gestion and Grupo Catalana go up and down completely randomly.

Pair Corralation between Iberpapel Gestion and Grupo Catalana

Assuming the 90 days trading horizon Iberpapel Gestion SA is expected to generate 1.08 times more return on investment than Grupo Catalana. However, Iberpapel Gestion is 1.08 times more volatile than Grupo Catalana Occidente. It trades about 0.1 of its potential returns per unit of risk. Grupo Catalana Occidente is currently generating about -0.07 per unit of risk. If you would invest  1,770  in Iberpapel Gestion SA on September 13, 2024 and sell it today you would earn a total of  105.00  from holding Iberpapel Gestion SA or generate 5.93% return on investment over 90 days.

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

Iberpapel Gestion SA  vs.  Grupo Catalana Occidente

Iberpapel Gestion

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Iberpapel Gestion SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Iberpapel Gestion is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Grupo Catalana Occidente

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Catalana Occidente has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Grupo Catalana is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Iberpapel Gestion and Grupo Catalana

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

The idea behind Iberpapel Gestion SA and Grupo Catalana Occidente 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.