Correlation Between National Beverage and Grupo Aval

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

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

Diversification Opportunities for National Beverage and Grupo Aval

0.73

Correlation Coefficient

National Beverage  Grupo Aval

Poor diversification

The 3 months correlation between National and Grupo is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp 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 National Beverage 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 National Beverage Corp 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 National Beverage i.e., National Beverage and Grupo Aval go up and down completely randomly.

Pair Corralation between National Beverage and Grupo Aval

Assuming the 90 days horizon National Beverage is expected to generate 1.2 times less return on investment than Grupo Aval. In addition to that, National Beverage is 1.18 times more volatile than Grupo Aval Acciones. It trades about 0.06 of its total potential returns per unit of risk. Grupo Aval Acciones is currently generating about 0.09 per unit of volatility. If you would invest  181.00  in Grupo Aval Acciones on September 23, 2024 and sell it today you would earn a total of  10.00  from holding Grupo Aval Acciones or generate 5.52% return on investment over 90 days.

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

National Beverage Corp  vs.  Grupo Aval Acciones

National Beverage Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, National Beverage is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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. In spite of comparatively fragile basic indicators, Grupo Aval may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with National Beverage and Grupo Aval

The main advantage of trading using opposite National Beverage and Grupo Aval positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Beverage 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 National Beverage Corp 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.