Correlation Between Sparta Capital and Grupo Financiero

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

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

Diversification Opportunities for Sparta Capital and Grupo Financiero

0.51

Correlation Coefficient

Sparta Capital  Grupo Financiero

Very weak diversification

The 3 months correlation between Sparta and Grupo is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Sparta Capital and Grupo Financiero Inbursa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Financiero Inbursa and Sparta Capital 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 Sparta Capital are associated (or correlated) with Grupo Financiero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Financiero Inbursa has no effect on the direction of Sparta Capital i.e., Sparta Capital and Grupo Financiero go up and down completely randomly.

Pair Corralation between Sparta Capital and Grupo Financiero

Assuming the 90 days horizon Sparta Capital is expected to under-perform the Grupo Financiero. In addition to that, Sparta Capital is 1.68 times more volatile than Grupo Financiero Inbursa. It trades about -0.13 of its total potential returns per unit of risk. Grupo Financiero Inbursa is currently generating about -0.02 per unit of volatility. If you would invest  221.00  in Grupo Financiero Inbursa on September 12, 2024 and sell it today you would lose (6.00) from holding Grupo Financiero Inbursa or give up 2.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

Sparta Capital  vs.  Grupo Financiero Inbursa

Sparta Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sparta Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Grupo Financiero Inbursa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Financiero Inbursa has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Grupo Financiero is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sparta Capital and Grupo Financiero

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

The idea behind Sparta Capital and Grupo Financiero Inbursa 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.