Correlation Between Grupo Aval and ELECTRONIC ARTS

Can any of the company-specific risk be diversified away by investing in both Grupo Aval and ELECTRONIC ARTS 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 ELECTRONIC ARTS 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 ELECTRONIC ARTS, you can compare the effects of market volatilities on Grupo Aval and ELECTRONIC ARTS 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 ELECTRONIC ARTS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo Aval and ELECTRONIC ARTS.

Diversification Opportunities for Grupo Aval and ELECTRONIC ARTS

-0.14

Correlation Coefficient

Grupo Aval  ELECTRONIC ARTS

Good diversification

The 3 months correlation between Grupo and ELECTRONIC is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Aval Acciones and ELECTRONIC ARTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELECTRONIC ARTS 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 ELECTRONIC ARTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELECTRONIC ARTS has no effect on the direction of Grupo Aval i.e., Grupo Aval and ELECTRONIC ARTS go up and down completely randomly.

Pair Corralation between Grupo Aval and ELECTRONIC ARTS

Assuming the 90 days trading horizon Grupo Aval Acciones is expected to generate 0.4 times more return on investment than ELECTRONIC ARTS. However, Grupo Aval Acciones is 2.51 times less risky than ELECTRONIC ARTS. It trades about 0.46 of its potential returns per unit of risk. ELECTRONIC ARTS is currently generating about -0.37 per unit of risk. If you would invest  194.00  in Grupo Aval Acciones on October 27, 2024 and sell it today you would earn a total of  24.00  from holding Grupo Aval Acciones or generate 12.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Grupo Aval Acciones  vs.  ELECTRONIC ARTS

Grupo Aval Acciones

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Aval Acciones are ranked lower than 16 (%) 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.

ELECTRONIC ARTS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ELECTRONIC ARTS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Grupo Aval and ELECTRONIC ARTS

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

The idea behind Grupo Aval Acciones and ELECTRONIC ARTS 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.