Correlation Between Sembcorp Industries and Grupo Bimbo

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

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

Diversification Opportunities for Sembcorp Industries and Grupo Bimbo

-0.48

Correlation Coefficient

Sembcorp Industries  Grupo Bimbo

Very good diversification

The 3 months correlation between Sembcorp and Grupo is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Sembcorp Industries and Grupo Bimbo SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Bimbo SAB and Sembcorp Industries 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 Sembcorp Industries are associated (or correlated) with Grupo Bimbo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Bimbo SAB has no effect on the direction of Sembcorp Industries i.e., Sembcorp Industries and Grupo Bimbo go up and down completely randomly.

Pair Corralation between Sembcorp Industries and Grupo Bimbo

Assuming the 90 days horizon Sembcorp Industries is expected to generate 0.19 times more return on investment than Grupo Bimbo. However, Sembcorp Industries is 5.15 times less risky than Grupo Bimbo. It trades about 0.31 of its potential returns per unit of risk. Grupo Bimbo SAB is currently generating about -0.17 per unit of risk. If you would invest  383.00  in Sembcorp Industries on February 6, 2024 and sell it today you would earn a total of  13.00  from holding Sembcorp Industries or generate 3.39% return on investment over 90 days.

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

Sembcorp Industries  vs.  Grupo Bimbo SAB

Sembcorp Industries

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sembcorp Industries are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sembcorp Industries may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Grupo Bimbo SAB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sembcorp Industries and Grupo Bimbo

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

The idea behind Sembcorp Industries and Grupo Bimbo 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.

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.