Correlation Between Grupo Hotelero and American International

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

By analyzing existing cross correlation between Grupo Hotelero Santa and American International Group, you can compare the effects of market volatilities on Grupo Hotelero and American International 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 Hotelero with a short position of American International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo Hotelero and American International.

Diversification Opportunities for Grupo Hotelero and American International

-0.36

Correlation Coefficient

Grupo Hotelero  American International

Very good diversification

The 3 months correlation between Grupo and American is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Hotelero Santa and American International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American International and Grupo Hotelero 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 Hotelero Santa are associated (or correlated) with American International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American International has no effect on the direction of Grupo Hotelero i.e., Grupo Hotelero and American International go up and down completely randomly.

Pair Corralation between Grupo Hotelero and American International

Assuming the 90 days trading horizon Grupo Hotelero Santa is expected to under-perform the American International. In addition to that, Grupo Hotelero is 1.73 times more volatile than American International Group. It trades about -0.02 of its total potential returns per unit of risk. American International Group is currently generating about 0.2 per unit of volatility. If you would invest  127,200  in American International Group on March 1, 2024 and sell it today you would earn a total of  5,576  from holding American International Group or generate 4.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

Grupo Hotelero Santa  vs.  American International Group

Grupo Hotelero Santa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Hotelero Santa has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Grupo Hotelero is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

American International

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American International Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, American International may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Grupo Hotelero and American International

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

The idea behind Grupo Hotelero Santa and American International Group 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.