Correlation Between Grupo Aval and Sonoma Pharmaceuticals

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

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

Diversification Opportunities for Grupo Aval and Sonoma Pharmaceuticals

0.0

Correlation Coefficient

Grupo Aval  Sonoma Pharmaceuticals

Pay attention - limited upside

The 3 months correlation between Grupo and Sonoma is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Aval and Sonoma Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonoma Pharmaceuticals 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 Sonoma Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonoma Pharmaceuticals has no effect on the direction of Grupo Aval i.e., Grupo Aval and Sonoma Pharmaceuticals go up and down completely randomly.

Pair Corralation between Grupo Aval and Sonoma Pharmaceuticals

Given the investment horizon of 90 days Grupo Aval is expected to generate 0.38 times more return on investment than Sonoma Pharmaceuticals. However, Grupo Aval is 2.63 times less risky than Sonoma Pharmaceuticals. It trades about 0.21 of its potential returns per unit of risk. Sonoma Pharmaceuticals is currently generating about 0.04 per unit of risk. If you would invest  199.00  in Grupo Aval on December 28, 2024 and sell it today you would earn a total of  81.00  from holding Grupo Aval or generate 40.7% return on investment over 90 days.

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

Grupo Aval  vs.  Sonoma Pharmaceuticals

Grupo Aval

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Aval are ranked lower than 16 (%) 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.

Sonoma Pharmaceuticals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sonoma Pharmaceuticals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Sonoma Pharmaceuticals sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grupo Aval and Sonoma Pharmaceuticals

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

The idea behind Grupo Aval and Sonoma Pharmaceuticals 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.