Correlation Between Grupo Aval and SHIN ETSU

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

Diversification Opportunities for Grupo Aval and SHIN ETSU

-0.57

Correlation Coefficient

Grupo Aval  SHIN ETSU

Excellent diversification

The 3 months correlation between Grupo and SHIN is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Aval Acciones and SHIN ETSU CHEMICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHIN ETSU CHEMICAL 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 SHIN ETSU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHIN ETSU CHEMICAL has no effect on the direction of Grupo Aval i.e., Grupo Aval and SHIN ETSU go up and down completely randomly.

Pair Corralation between Grupo Aval and SHIN ETSU

Assuming the 90 days trading horizon Grupo Aval Acciones is expected to generate 1.06 times more return on investment than SHIN ETSU. However, Grupo Aval is 1.06 times more volatile than SHIN ETSU CHEMICAL. It trades about 0.19 of its potential returns per unit of risk. SHIN ETSU CHEMICAL is currently generating about -0.07 per unit of risk. If you would invest  187.00  in Grupo Aval Acciones on September 16, 2024 and sell it today you would earn a total of  13.00  from holding Grupo Aval Acciones or generate 6.95% return on investment over 90 days.

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

Grupo Aval Acciones  vs.  SHIN ETSU CHEMICAL

Grupo Aval Acciones

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Aval Acciones are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Grupo Aval may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SHIN ETSU CHEMICAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SHIN ETSU CHEMICAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Grupo Aval and SHIN ETSU

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

The idea behind Grupo Aval Acciones and SHIN ETSU CHEMICAL 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.