Correlation Between Alliance Data and Grupo Aval

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

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

Diversification Opportunities for Alliance Data and Grupo Aval

-0.56

Correlation Coefficient

Alliance Data  Grupo Aval

Excellent diversification

The 3 months correlation between Alliance and Grupo is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems 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 Alliance Data 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 Alliance Data Systems 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 Alliance Data i.e., Alliance Data and Grupo Aval go up and down completely randomly.

Pair Corralation between Alliance Data and Grupo Aval

Assuming the 90 days trading horizon Alliance Data Systems is expected to under-perform the Grupo Aval. But the stock apears to be less risky and, when comparing its historical volatility, Alliance Data Systems is 1.22 times less risky than Grupo Aval. The stock trades about -0.16 of its potential returns per unit of risk. The Grupo Aval Acciones is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  191.00  in Grupo Aval Acciones on December 22, 2024 and sell it today you would earn a total of  63.00  from holding Grupo Aval Acciones or generate 32.98% return on investment over 90 days.

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

Alliance Data Systems  vs.  Grupo Aval Acciones

Alliance Data Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alliance Data Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Grupo Aval Acciones

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Aval Acciones are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Grupo Aval reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alliance Data and Grupo Aval

The main advantage of trading using opposite Alliance Data and Grupo Aval positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliance Data 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 Alliance Data Systems 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.