Correlation Between National Bank and Grupo Aval

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

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

Diversification Opportunities for National Bank and Grupo Aval

-0.47

Correlation Coefficient

National Bank  Grupo Aval

Very good diversification

The 3 months correlation between National and Grupo is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings 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 National Bank 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 National Bank Holdings 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 National Bank i.e., National Bank and Grupo Aval go up and down completely randomly.

Pair Corralation between National Bank and Grupo Aval

Assuming the 90 days horizon National Bank Holdings is expected to under-perform the Grupo Aval. But the stock apears to be less risky and, when comparing its historical volatility, National Bank Holdings is 1.82 times less risky than Grupo Aval. The stock trades about -0.11 of its potential returns per unit of risk. The Grupo Aval Acciones is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  193.00  in Grupo Aval Acciones on December 27, 2024 and sell it today you would earn a total of  59.00  from holding Grupo Aval Acciones or generate 30.57% return on investment over 90 days.

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

National Bank Holdings  vs.  Grupo Aval Acciones

National Bank Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Bank Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 12 (%) 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 National Bank and Grupo Aval

The main advantage of trading using opposite National Bank and Grupo Aval positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank 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 National Bank Holdings 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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.