Correlation Between CHEMICAL INDUSTRIES and Grupo Aval

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

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

Diversification Opportunities for CHEMICAL INDUSTRIES and Grupo Aval

0.0

Correlation Coefficient

CHEMICAL INDUSTRIES  Grupo Aval

Pay attention - limited upside

The 3 months correlation between CHEMICAL and Grupo is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding CHEMICAL INDUSTRIES 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 CHEMICAL INDUSTRIES 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 CHEMICAL INDUSTRIES 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 CHEMICAL INDUSTRIES i.e., CHEMICAL INDUSTRIES and Grupo Aval go up and down completely randomly.

Pair Corralation between CHEMICAL INDUSTRIES and Grupo Aval

Assuming the 90 days trading horizon CHEMICAL INDUSTRIES is expected to generate 1.81 times less return on investment than Grupo Aval. But when comparing it to its historical volatility, CHEMICAL INDUSTRIES is 9.26 times less risky than Grupo Aval. It trades about 0.06 of its potential returns per unit of risk. Grupo Aval Acciones is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  193.00  in Grupo Aval Acciones on October 4, 2024 and sell it today you would earn a total of  1.00  from holding Grupo Aval Acciones or generate 0.52% return on investment over 90 days.

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

CHEMICAL INDUSTRIES  vs.  Grupo Aval Acciones

CHEMICAL INDUSTRIES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHEMICAL INDUSTRIES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, CHEMICAL INDUSTRIES is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Grupo Aval Acciones

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Aval Acciones are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Grupo Aval may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with CHEMICAL INDUSTRIES and Grupo Aval

The main advantage of trading using opposite CHEMICAL INDUSTRIES and Grupo Aval positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHEMICAL INDUSTRIES 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 CHEMICAL INDUSTRIES 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.