Correlation Between Kimberly Clark and Gruma SAB

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

By analyzing existing cross correlation between Kimberly Clark de Mxico and Gruma SAB de, you can compare the effects of market volatilities on Kimberly Clark and Gruma SAB 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 Kimberly Clark with a short position of Gruma SAB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kimberly Clark and Gruma SAB.

Diversification Opportunities for Kimberly Clark and Gruma SAB

0.69

Correlation Coefficient

Kimberly Clark  Gruma SAB

Poor diversification

The 3 months correlation between Kimberly and Gruma is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Kimberly Clark de Mxico and Gruma SAB de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gruma SAB de and Kimberly Clark 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 Kimberly Clark de Mxico are associated (or correlated) with Gruma SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gruma SAB de has no effect on the direction of Kimberly Clark i.e., Kimberly Clark and Gruma SAB go up and down completely randomly.

Pair Corralation between Kimberly Clark and Gruma SAB

Assuming the 90 days trading horizon Kimberly Clark de Mxico is expected to under-perform the Gruma SAB. But the stock apears to be less risky and, when comparing its historical volatility, Kimberly Clark de Mxico is 1.33 times less risky than Gruma SAB. The stock trades about -0.2 of its potential returns per unit of risk. The Gruma SAB de is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  36,645  in Gruma SAB de on August 31, 2024 and sell it today you would lose (1,849) from holding Gruma SAB de or give up 5.05% of portfolio value over 90 days.

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

Kimberly Clark de Mxico  vs.  Gruma SAB de

Kimberly Clark de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kimberly Clark de Mxico has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Gruma SAB de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gruma SAB de has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Gruma SAB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kimberly Clark and Gruma SAB

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

The idea behind Kimberly Clark de Mxico and Gruma SAB de 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..