Correlation Between Oversea Chinese and Grupo Aval

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

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

Diversification Opportunities for Oversea Chinese and Grupo Aval

0.35

Correlation Coefficient

Oversea Chinese  Grupo Aval

Weak diversification

The 3 months correlation between Oversea and Grupo is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Oversea Chinese Banking 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 Oversea Chinese 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 Oversea Chinese Banking 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 Oversea Chinese i.e., Oversea Chinese and Grupo Aval go up and down completely randomly.

Pair Corralation between Oversea Chinese and Grupo Aval

Assuming the 90 days trading horizon Oversea Chinese is expected to generate 25.69 times less return on investment than Grupo Aval. But when comparing it to its historical volatility, Oversea Chinese Banking is 2.46 times less risky than Grupo Aval. It trades about 0.02 of its potential returns per unit of risk. Grupo Aval Acciones is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  192.00  in Grupo Aval Acciones on December 30, 2024 and sell it today you would earn a total of  62.00  from holding Grupo Aval Acciones or generate 32.29% return on investment over 90 days.

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

Oversea Chinese Banking  vs.  Grupo Aval Acciones

Oversea Chinese Banking

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Oversea Chinese Banking are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental drivers, Oversea Chinese is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the 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 fragile basic indicators, Grupo Aval reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oversea Chinese and Grupo Aval

The main advantage of trading using opposite Oversea Chinese and Grupo Aval positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oversea Chinese 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 Oversea Chinese Banking 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.