Correlation Between El Puerto and Financiera Independencia

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

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

Diversification Opportunities for El Puerto and Financiera Independencia

0.77

Correlation Coefficient

El Puerto  Financiera Independencia

Poor diversification

The 3 months correlation between LIVEPOLC-1 and Financiera is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding El Puerto de and Financiera Independencia SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financiera Independencia and El Puerto 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 El Puerto de are associated (or correlated) with Financiera Independencia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financiera Independencia has no effect on the direction of El Puerto i.e., El Puerto and Financiera Independencia go up and down completely randomly.

Pair Corralation between El Puerto and Financiera Independencia

Assuming the 90 days trading horizon El Puerto de is expected to generate 1.01 times more return on investment than Financiera Independencia. However, El Puerto is 1.01 times more volatile than Financiera Independencia SAB. It trades about -0.12 of its potential returns per unit of risk. Financiera Independencia SAB is currently generating about -0.14 per unit of risk. If you would invest  11,446  in El Puerto de on September 3, 2024 and sell it today you would lose (1,281) from holding El Puerto de or give up 11.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

El Puerto de  vs.  Financiera Independencia SAB

El Puerto de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days El Puerto de has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Financiera Independencia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Financiera Independencia SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with El Puerto and Financiera Independencia

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

The idea behind El Puerto de and Financiera Independencia SAB 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.