Correlation Between GOLD ROAD and Grupo Aval

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

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

Diversification Opportunities for GOLD ROAD and Grupo Aval

0.8

Correlation Coefficient

GOLD ROAD  Grupo Aval

Very poor diversification

The 3 months correlation between GOLD and Grupo is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding GOLD ROAD RES and Grupo Aval Acciones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Aval Acciones and GOLD ROAD 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 GOLD ROAD RES 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 Acciones has no effect on the direction of GOLD ROAD i.e., GOLD ROAD and Grupo Aval go up and down completely randomly.

Pair Corralation between GOLD ROAD and Grupo Aval

Assuming the 90 days trading horizon GOLD ROAD RES is expected to generate 0.94 times more return on investment than Grupo Aval. However, GOLD ROAD RES is 1.07 times less risky than Grupo Aval. It trades about 0.84 of its potential returns per unit of risk. Grupo Aval Acciones is currently generating about 0.46 per unit of risk. If you would invest  122.00  in GOLD ROAD RES on October 22, 2024 and sell it today you would earn a total of  20.00  from holding GOLD ROAD RES or generate 16.39% return on investment over 90 days.

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

GOLD ROAD RES  vs.  Grupo Aval Acciones

GOLD ROAD RES

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GOLD ROAD RES are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, GOLD ROAD exhibited solid returns over the last few months and may actually be approaching a breakup point.

Grupo Aval Acciones

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Aval Acciones are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Grupo Aval unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GOLD ROAD and Grupo Aval

The main advantage of trading using opposite GOLD ROAD and Grupo Aval positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GOLD ROAD 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 GOLD ROAD RES and Grupo Aval Acciones 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.