Correlation Between Grupo Gigante and EBay

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

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

Diversification Opportunities for Grupo Gigante and EBay

0.83

Correlation Coefficient

Grupo Gigante  EBay

Very poor diversification

The 3 months correlation between Grupo and EBay is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Gigante S and eBay Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eBay Inc and Grupo Gigante 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 Gigante S are associated (or correlated) with EBay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eBay Inc has no effect on the direction of Grupo Gigante i.e., Grupo Gigante and EBay go up and down completely randomly.

Pair Corralation between Grupo Gigante and EBay

Assuming the 90 days trading horizon Grupo Gigante S is expected to generate 0.86 times more return on investment than EBay. However, Grupo Gigante S is 1.17 times less risky than EBay. It trades about 0.03 of its potential returns per unit of risk. eBay Inc is currently generating about 0.0 per unit of risk. If you would invest  2,800  in Grupo Gigante S on February 4, 2024 and sell it today you would earn a total of  400.00  from holding Grupo Gigante S or generate 14.29% return on investment over 90 days.

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

Grupo Gigante S  vs.  eBay Inc

Grupo Gigante S

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Gigante S are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Grupo Gigante is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

eBay Inc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in eBay Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, EBay showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grupo Gigante and EBay

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

The idea behind Grupo Gigante S and eBay Inc 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.