Correlation Between Banco Macro and Grupo Aval

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

By analyzing existing cross correlation between Banco Macro SA and Grupo Aval, you can compare the effects of market volatilities on Banco Macro and Grupo Aval 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 Banco Macro with a short position of Grupo Aval. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Macro and Grupo Aval.

Diversification Opportunities for Banco Macro and Grupo Aval

0.67

Correlation Coefficient

Banco Macro  Grupo Aval

Poor diversification

The 3 months correlation between Banco and Grupo is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Banco Macro SA and Grupo Aval in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Aval and Banco Macro 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 Banco Macro SA are associated (or correlated) with Grupo Aval. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Aval has no effect on the direction of Banco Macro i.e., Banco Macro and Grupo Aval go up and down completely randomly.

Pair Corralation between Banco Macro and Grupo Aval

Considering the 90-day investment horizon Banco Macro SA is expected to generate 1.76 times more return on investment than Grupo Aval. However, Banco Macro is 1.76 times more volatile than Grupo Aval. It trades about 0.22 of its potential returns per unit of risk. Grupo Aval is currently generating about 0.22 per unit of risk. If you would invest  7,978  in Banco Macro SA on September 13, 2024 and sell it today you would earn a total of  1,089  from holding Banco Macro SA or generate 13.65% return on investment over 90 days.

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

Banco Macro SA  vs.  Grupo Aval

Banco Macro SA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Macro SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal primary indicators, Banco Macro sustained solid returns over the last few months and may actually be approaching a breakup point.

Grupo Aval

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Aval are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Grupo Aval may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Banco Macro and Grupo Aval

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

The idea behind Banco Macro SA and Grupo Aval 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.

Check out your portfolio center.

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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.