Correlation Between Grupo Aval and Nu Holdings

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

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

Diversification Opportunities for Grupo Aval and Nu Holdings

-0.8

Correlation Coefficient

Grupo Aval  Nu Holdings

Pay attention - limited upside

The 3 months correlation between Grupo and Nu Holdings is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Aval and Nu Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nu Holdings 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 Nu Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nu Holdings has no effect on the direction of Grupo Aval i.e., Grupo Aval and Nu Holdings go up and down completely randomly.

Pair Corralation between Grupo Aval and Nu Holdings

Given the investment horizon of 90 days Grupo Aval is expected to generate 0.62 times more return on investment than Nu Holdings. However, Grupo Aval is 1.62 times less risky than Nu Holdings. It trades about -0.01 of its potential returns per unit of risk. Nu Holdings is currently generating about -0.26 per unit of risk. If you would invest  209.00  in Grupo Aval on September 18, 2024 and sell it today you would lose (1.00) from holding Grupo Aval or give up 0.48% of portfolio value over 90 days.

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

Grupo Aval  vs.  Nu Holdings

Grupo Aval

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Aval are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Grupo Aval is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Nu Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nu Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Grupo Aval and Nu Holdings

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

The idea behind Grupo Aval and Nu Holdings 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..