Correlation Between Grupo Aval and Sporttotal

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

Diversification Opportunities for Grupo Aval and Sporttotal

-0.3

Correlation Coefficient

Grupo Aval  Sporttotal

Very good diversification

The 3 months correlation between Grupo and Sporttotal is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Aval Acciones and Sporttotal AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sporttotal AG 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 Sporttotal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sporttotal AG has no effect on the direction of Grupo Aval i.e., Grupo Aval and Sporttotal go up and down completely randomly.

Pair Corralation between Grupo Aval and Sporttotal

Assuming the 90 days trading horizon Grupo Aval is expected to generate 11.7 times less return on investment than Sporttotal. But when comparing it to its historical volatility, Grupo Aval Acciones is 14.87 times less risky than Sporttotal. It trades about 0.14 of its potential returns per unit of risk. Sporttotal AG is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  20.00  in Sporttotal AG on December 26, 2024 and sell it today you would lose (15.35) from holding Sporttotal AG or give up 76.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Grupo Aval Acciones  vs.  Sporttotal AG

Grupo Aval Acciones

Risk-Adjusted Performance

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. In spite of comparatively fragile basic indicators, Grupo Aval unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sporttotal AG

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sporttotal AG are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Sporttotal reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grupo Aval and Sporttotal

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

The idea behind Grupo Aval Acciones and Sporttotal AG 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.