Correlation Between SMA Solar and Grupo Aval

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

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

Diversification Opportunities for SMA Solar and Grupo Aval

-0.02

Correlation Coefficient

SMA Solar  Grupo Aval

Good diversification

The 3 months correlation between SMA and Grupo is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology 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 SMA Solar 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 SMA Solar Technology 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 SMA Solar i.e., SMA Solar and Grupo Aval go up and down completely randomly.

Pair Corralation between SMA Solar and Grupo Aval

Assuming the 90 days horizon SMA Solar is expected to generate 4.02 times less return on investment than Grupo Aval. In addition to that, SMA Solar is 3.47 times more volatile than Grupo Aval Acciones. It trades about 0.04 of its total potential returns per unit of risk. Grupo Aval Acciones is currently generating about 0.49 per unit of volatility. If you would invest  194.00  in Grupo Aval Acciones on October 25, 2024 and sell it today you would earn a total of  22.00  from holding Grupo Aval Acciones or generate 11.34% return on investment over 90 days.

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

SMA Solar Technology  vs.  Grupo Aval Acciones

SMA Solar Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SMA Solar Technology 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

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Aval Acciones are ranked lower than 16 (%) 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 SMA Solar and Grupo Aval

The main advantage of trading using opposite SMA Solar and Grupo Aval positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMA Solar 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 SMA Solar Technology 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.