Correlation Between Grupo KUO and FibraHotel

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

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

Diversification Opportunities for Grupo KUO and FibraHotel

0.2

Correlation Coefficient

Grupo KUO  FibraHotel

Modest diversification

The 3 months correlation between Grupo and FibraHotel is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Grupo KUO SAB and FibraHotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FibraHotel and Grupo KUO 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 KUO SAB are associated (or correlated) with FibraHotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FibraHotel has no effect on the direction of Grupo KUO i.e., Grupo KUO and FibraHotel go up and down completely randomly.

Pair Corralation between Grupo KUO and FibraHotel

Assuming the 90 days trading horizon Grupo KUO is expected to generate 2.56 times less return on investment than FibraHotel. But when comparing it to its historical volatility, Grupo KUO SAB is 1.26 times less risky than FibraHotel. It trades about 0.06 of its potential returns per unit of risk. FibraHotel is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  809.00  in FibraHotel on September 26, 2024 and sell it today you would earn a total of  191.00  from holding FibraHotel or generate 23.61% return on investment over 90 days.

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

Grupo KUO SAB  vs.  FibraHotel

Grupo KUO SAB

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo KUO SAB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Grupo KUO may actually be approaching a critical reversion point that can send shares even higher in January 2025.

FibraHotel

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FibraHotel are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, FibraHotel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grupo KUO and FibraHotel

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

The idea behind Grupo KUO SAB and FibraHotel 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.