Correlation Between Bancolombia and Tinley Beverage

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

By analyzing existing cross correlation between Bancolombia SA ADR and The Tinley Beverage, you can compare the effects of market volatilities on Bancolombia and Tinley Beverage 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 Bancolombia with a short position of Tinley Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bancolombia and Tinley Beverage.

Diversification Opportunities for Bancolombia and Tinley Beverage

-0.43

Correlation Coefficient

Bancolombia  Tinley Beverage

Very good diversification

The 3 months correlation between Bancolombia and Tinley is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Bancolombia SA ADR and The Tinley Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tinley Beverage and Bancolombia 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 Bancolombia SA ADR are associated (or correlated) with Tinley Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tinley Beverage has no effect on the direction of Bancolombia i.e., Bancolombia and Tinley Beverage go up and down completely randomly.

Pair Corralation between Bancolombia and Tinley Beverage

Considering the 90-day investment horizon Bancolombia is expected to generate 1.42 times less return on investment than Tinley Beverage. But when comparing it to its historical volatility, Bancolombia SA ADR is 11.06 times less risky than Tinley Beverage. It trades about 0.26 of its potential returns per unit of risk. The Tinley Beverage is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2.20  in The Tinley Beverage on November 19, 2024 and sell it today you would lose (0.70) from holding The Tinley Beverage or give up 31.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Bancolombia SA ADR  vs.  The Tinley Beverage

Bancolombia SA ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bancolombia SA ADR are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent forward indicators, Bancolombia sustained solid returns over the last few months and may actually be approaching a breakup point.

Tinley Beverage

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Tinley Beverage are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady fundamental drivers, Tinley Beverage reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bancolombia and Tinley Beverage

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

The idea behind Bancolombia SA ADR and The Tinley Beverage 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.