Correlation Between Tectonic Financial and Grupo Aval

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

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

Diversification Opportunities for Tectonic Financial and Grupo Aval

-0.39

Correlation Coefficient

Tectonic Financial  Grupo Aval

Very good diversification

The 3 months correlation between Tectonic and Grupo is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Tectonic Financial PR and Grupo Aval in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Aval and Tectonic Financial 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 Tectonic Financial PR 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 Tectonic Financial i.e., Tectonic Financial and Grupo Aval go up and down completely randomly.

Pair Corralation between Tectonic Financial and Grupo Aval

Assuming the 90 days horizon Tectonic Financial is expected to generate 2.13 times less return on investment than Grupo Aval. But when comparing it to its historical volatility, Tectonic Financial PR is 3.61 times less risky than Grupo Aval. It trades about 0.18 of its potential returns per unit of risk. Grupo Aval is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  230.00  in Grupo Aval on February 1, 2024 and sell it today you would earn a total of  9.00  from holding Grupo Aval or generate 3.91% return on investment over 90 days.

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

Tectonic Financial PR  vs.  Grupo Aval

Tectonic Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tectonic Financial PR are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Tectonic Financial is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Grupo Aval

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Aval has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Tectonic Financial and Grupo Aval

The main advantage of trading using opposite Tectonic Financial and Grupo Aval positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tectonic Financial 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 Tectonic Financial PR and Grupo Aval 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.