Correlation Between Woori Financial and Grupo Aval

Can any of the company-specific risk be diversified away by investing in both Woori 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 Woori 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 Woori Financial Group and Grupo Aval, you can compare the effects of market volatilities on Woori 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 Woori Financial with a short position of Grupo Aval. Check out your portfolio center. Please also check ongoing floating volatility patterns of Woori Financial and Grupo Aval.

Diversification Opportunities for Woori Financial and Grupo Aval

-0.56

Correlation Coefficient

Woori Financial  Grupo Aval

Excellent diversification

The 3 months correlation between Woori and Grupo is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Woori Financial Group and Grupo Aval in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Aval and Woori 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 Woori Financial Group 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 Woori Financial i.e., Woori Financial and Grupo Aval go up and down completely randomly.

Pair Corralation between Woori Financial and Grupo Aval

Allowing for the 90-day total investment horizon Woori Financial Group is expected to generate 0.76 times more return on investment than Grupo Aval. However, Woori Financial Group is 1.32 times less risky than Grupo Aval. It trades about 0.02 of its potential returns per unit of risk. Grupo Aval is currently generating about -0.01 per unit of risk. If you would invest  2,795  in Woori Financial Group on January 31, 2024 and sell it today you would earn a total of  350.00  from holding Woori Financial Group or generate 12.52% return on investment over 90 days.

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

Woori Financial Group  vs.  Grupo Aval

Woori Financial Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Woori Financial Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Woori Financial may actually be approaching a critical reversion point that can send shares even higher in May 2024.

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 quite persistent basic indicators, Grupo Aval is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Woori Financial and Grupo Aval

The main advantage of trading using opposite Woori Financial and Grupo Aval positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Woori 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 Woori Financial Group 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.