Correlation Between Bancolombia and Grupo Aval
Can any of the company-specific risk be diversified away by investing in both Bancolombia 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 Bancolombia and Grupo Aval into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bancolombia SA ADR and Grupo Aval, you can compare the effects of market volatilities on Bancolombia 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 Bancolombia with a short position of Grupo Aval. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bancolombia and Grupo Aval.
Diversification Opportunities for Bancolombia and Grupo Aval
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bancolombia and Grupo is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Bancolombia SA ADR and Grupo Aval in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Aval and Bancolombia 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 Bancolombia SA ADR 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 has no effect on the direction of Bancolombia i.e., Bancolombia and Grupo Aval go up and down completely randomly.
Pair Corralation between Bancolombia and Grupo Aval
Considering the 90-day investment horizon Bancolombia SA ADR is expected to under-perform the Grupo Aval. But the stock apears to be less risky and, when comparing its historical volatility, Bancolombia SA ADR is 1.01 times less risky than Grupo Aval. The stock trades about -0.05 of its potential returns per unit of risk. The Grupo Aval is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 221.00 in Grupo Aval on January 20, 2024 and sell it today you would earn a total of 14.00 from holding Grupo Aval or generate 6.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bancolombia SA ADR vs. Grupo Aval
Performance |
| Timeline |
| Bancolombia SA ADR |
| Grupo Aval |
Bancolombia and Grupo Aval Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bancolombia and Grupo Aval
The main advantage of trading using opposite Bancolombia and Grupo Aval positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bancolombia 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.| Bancolombia vs. CrossFirst Bankshares | Bancolombia vs. Banco Bradesco SA | Bancolombia vs. CF Bankshares | Bancolombia vs. Foreign Trade Bank |
| Grupo Aval vs. CrossFirst Bankshares | Grupo Aval vs. Banco Bradesco SA | Grupo Aval vs. CF Bankshares | Grupo Aval vs. Foreign Trade Bank |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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