Correlation Between Grupo Aval and VONOVIA SE

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

Diversification Opportunities for Grupo Aval and VONOVIA SE

-0.38

Correlation Coefficient

Grupo Aval  VONOVIA SE

Very good diversification

The 3 months correlation between Grupo and VONOVIA is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Aval Acciones and VONOVIA SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VONOVIA SE ADR 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 VONOVIA SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VONOVIA SE ADR has no effect on the direction of Grupo Aval i.e., Grupo Aval and VONOVIA SE go up and down completely randomly.

Pair Corralation between Grupo Aval and VONOVIA SE

Assuming the 90 days trading horizon Grupo Aval is expected to generate 3.8 times less return on investment than VONOVIA SE. But when comparing it to its historical volatility, Grupo Aval Acciones is 1.24 times less risky than VONOVIA SE. It trades about 0.01 of its potential returns per unit of risk. VONOVIA SE ADR is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,159  in VONOVIA SE ADR on October 11, 2024 and sell it today you would earn a total of  271.00  from holding VONOVIA SE ADR or generate 23.38% return on investment over 90 days.

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

Grupo Aval Acciones  vs.  VONOVIA SE ADR

Grupo Aval Acciones

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Aval Acciones are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Grupo Aval may actually be approaching a critical reversion point that can send shares even higher in February 2025.

VONOVIA SE ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VONOVIA SE ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic 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 Grupo Aval and VONOVIA SE

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

The idea behind Grupo Aval Acciones and VONOVIA SE ADR 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.