Correlation Between Grupo Aval and POSBO UNSPADRS/20YC1

Can any of the company-specific risk be diversified away by investing in both Grupo Aval and POSBO UNSPADRS/20YC1 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 Aval and POSBO UNSPADRS/20YC1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Grupo Aval Acciones and POSBO UNSPADRS20YC1, you can compare the effects of market volatilities on Grupo Aval and POSBO UNSPADRS/20YC1 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 Aval with a short position of POSBO UNSPADRS/20YC1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo Aval and POSBO UNSPADRS/20YC1.

Diversification Opportunities for Grupo Aval and POSBO UNSPADRS/20YC1

0.44

Correlation Coefficient

Grupo Aval  POSBO UNSPADRS/20YC1

Very weak diversification

The 3 months correlation between Grupo and POSBO is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Aval Acciones and POSBO UNSPADRS20YC1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSBO UNSPADRS/20YC1 and Grupo Aval 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 Aval Acciones are associated (or correlated) with POSBO UNSPADRS/20YC1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POSBO UNSPADRS/20YC1 has no effect on the direction of Grupo Aval i.e., Grupo Aval and POSBO UNSPADRS/20YC1 go up and down completely randomly.

Pair Corralation between Grupo Aval and POSBO UNSPADRS/20YC1

Assuming the 90 days trading horizon Grupo Aval Acciones is expected to generate 0.69 times more return on investment than POSBO UNSPADRS/20YC1. However, Grupo Aval Acciones is 1.44 times less risky than POSBO UNSPADRS/20YC1. It trades about 0.44 of its potential returns per unit of risk. POSBO UNSPADRS20YC1 is currently generating about 0.2 per unit of risk. If you would invest  193.00  in Grupo Aval Acciones on October 20, 2024 and sell it today you would earn a total of  19.00  from holding Grupo Aval Acciones or generate 9.84% return on investment over 90 days.

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

Grupo Aval Acciones  vs.  POSBO UNSPADRS20YC1

Grupo Aval Acciones

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Aval Acciones are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Grupo Aval reported solid returns over the last few months and may actually be approaching a breakup point.

POSBO UNSPADRS/20YC1

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in POSBO UNSPADRS20YC1 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, POSBO UNSPADRS/20YC1 may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Grupo Aval and POSBO UNSPADRS/20YC1

The main advantage of trading using opposite Grupo Aval and POSBO UNSPADRS/20YC1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Aval position performs unexpectedly, POSBO UNSPADRS/20YC1 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 POSBO UNSPADRS/20YC1 will offset losses from the drop in POSBO UNSPADRS/20YC1's long position.

The idea behind Grupo Aval Acciones and POSBO UNSPADRS20YC1 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.