Correlation Between Bancolombia and TGI Solar

Can any of the company-specific risk be diversified away by investing in both Bancolombia and TGI Solar 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 TGI Solar 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 TGI Solar Power, you can compare the effects of market volatilities on Bancolombia and TGI Solar 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 TGI Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bancolombia and TGI Solar.

Diversification Opportunities for Bancolombia and TGI Solar

0.58

Correlation Coefficient

Bancolombia  TGI Solar

Very weak diversification

The 3 months correlation between Bancolombia and TGI is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Bancolombia SA ADR and TGI Solar Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TGI Solar Power 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 TGI Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TGI Solar Power has no effect on the direction of Bancolombia i.e., Bancolombia and TGI Solar go up and down completely randomly.

Pair Corralation between Bancolombia and TGI Solar

Considering the 90-day investment horizon Bancolombia is expected to generate 2.0 times less return on investment than TGI Solar. But when comparing it to its historical volatility, Bancolombia SA ADR is 8.93 times less risky than TGI Solar. It trades about 0.15 of its potential returns per unit of risk. TGI Solar Power is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  0.24  in TGI Solar Power on December 5, 2024 and sell it today you would lose (0.11) from holding TGI Solar Power or give up 45.83% of portfolio value over 90 days.

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

Bancolombia SA ADR  vs.  TGI Solar Power

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 19 (%) 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.

TGI Solar Power

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TGI Solar Power are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, TGI Solar reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bancolombia and TGI Solar

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

The idea behind Bancolombia SA ADR and TGI Solar Power 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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.