Correlation Between Grupo Aval and Magyar Bancorp

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

By analyzing existing cross correlation between Grupo Aval and Magyar Bancorp, you can compare the effects of market volatilities on Grupo Aval and Magyar Bancorp 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 Magyar Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo Aval and Magyar Bancorp.

Diversification Opportunities for Grupo Aval and Magyar Bancorp

0.44

Correlation Coefficient

Grupo Aval  Magyar Bancorp

Very weak diversification

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

Pair Corralation between Grupo Aval and Magyar Bancorp

Given the investment horizon of 90 days Grupo Aval is expected to generate 1.81 times more return on investment than Magyar Bancorp. However, Grupo Aval is 1.81 times more volatile than Magyar Bancorp. It trades about 0.14 of its potential returns per unit of risk. Magyar Bancorp is currently generating about 0.09 per unit of risk. If you would invest  261.00  in Grupo Aval on December 4, 2024 and sell it today you would earn a total of  22.00  from holding Grupo Aval or generate 8.43% return on investment over 90 days.

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

Grupo Aval  vs.  Magyar Bancorp

Grupo Aval

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Aval are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Grupo Aval disclosed solid returns over the last few months and may actually be approaching a breakup point.

Magyar Bancorp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Magyar Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Magyar Bancorp is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Grupo Aval and Magyar Bancorp

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

The idea behind Grupo Aval and Magyar Bancorp 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.