Correlation Between US Bancorp and Grupo Cementos

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

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

Diversification Opportunities for US Bancorp and Grupo Cementos

0.79

Correlation Coefficient

US Bancorp  Grupo Cementos

Poor diversification

The 3 months correlation between USB and Grupo is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp and Grupo Cementos de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Cementos de and US Bancorp 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 US Bancorp are associated (or correlated) with Grupo Cementos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Cementos de has no effect on the direction of US Bancorp i.e., US Bancorp and Grupo Cementos go up and down completely randomly.

Pair Corralation between US Bancorp and Grupo Cementos

Assuming the 90 days trading horizon US Bancorp is expected to under-perform the Grupo Cementos. But the stock apears to be less risky and, when comparing its historical volatility, US Bancorp is 1.73 times less risky than Grupo Cementos. The stock trades about -0.04 of its potential returns per unit of risk. The Grupo Cementos de is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  17,540  in Grupo Cementos de on September 27, 2024 and sell it today you would earn a total of  901.00  from holding Grupo Cementos de or generate 5.14% return on investment over 90 days.

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

US Bancorp  vs.  Grupo Cementos de

US Bancorp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in US Bancorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, US Bancorp showed solid returns over the last few months and may actually be approaching a breakup point.

Grupo Cementos de

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Cementos de are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Grupo Cementos showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with US Bancorp and Grupo Cementos

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

The idea behind US Bancorp and Grupo Cementos 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.