Correlation Between Bancolombia and Xerox Corp

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Can any of the company-specific risk be diversified away by investing in both Bancolombia and Xerox Corp 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 Xerox Corp 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 Xerox Corp, you can compare the effects of market volatilities on Bancolombia and Xerox Corp 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 Xerox Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bancolombia and Xerox Corp.

Diversification Opportunities for Bancolombia and Xerox Corp

-0.23
  Correlation Coefficient

Very good diversification

The 3 months correlation between Bancolombia and Xerox is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Bancolombia SA ADR and Xerox Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xerox Corp 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 Xerox Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xerox Corp has no effect on the direction of Bancolombia i.e., Bancolombia and Xerox Corp go up and down completely randomly.

Pair Corralation between Bancolombia and Xerox Corp

Considering the 90-day investment horizon Bancolombia SA ADR is expected to generate 0.49 times more return on investment than Xerox Corp. However, Bancolombia SA ADR is 2.05 times less risky than Xerox Corp. It trades about 0.2 of its potential returns per unit of risk. Xerox Corp is currently generating about -0.08 per unit of risk. If you would invest  3,167  in Bancolombia SA ADR on December 29, 2023 and sell it today you would earn a total of  331.00  from holding Bancolombia SA ADR or generate 10.45% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Bancolombia SA ADR  vs.  Xerox Corp

 Performance 
       Timeline  
Bancolombia SA ADR 

Risk-Adjusted Performance

11 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Bancolombia SA ADR are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating forward indicators, Bancolombia sustained solid returns over the last few months and may actually be approaching a breakup point.
Xerox Corp 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Xerox Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Xerox Corp is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Bancolombia and Xerox Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bancolombia and Xerox Corp

The main advantage of trading using opposite Bancolombia and Xerox Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bancolombia position performs unexpectedly, Xerox Corp 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 Xerox Corp will offset losses from the drop in Xerox Corp's long position.
The idea behind Bancolombia SA ADR and Xerox Corp 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.

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