Correlation Between Grupo Aval and Vastned Retail

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

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

Diversification Opportunities for Grupo Aval and Vastned Retail

0.4

Correlation Coefficient

Grupo Aval  Vastned Retail

Very weak diversification

The 3 months correlation between Grupo and Vastned is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Aval Acciones and Vastned Retail NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vastned Retail NV and Grupo Aval 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 Grupo Aval Acciones are associated (or correlated) with Vastned Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vastned Retail NV has no effect on the direction of Grupo Aval i.e., Grupo Aval and Vastned Retail go up and down completely randomly.

Pair Corralation between Grupo Aval and Vastned Retail

Assuming the 90 days trading horizon Grupo Aval Acciones is expected to under-perform the Vastned Retail. In addition to that, Grupo Aval is 1.54 times more volatile than Vastned Retail NV. It trades about -0.02 of its total potential returns per unit of risk. Vastned Retail NV is currently generating about 0.03 per unit of volatility. If you would invest  2,061  in Vastned Retail NV on September 13, 2024 and sell it today you would earn a total of  99.00  from holding Vastned Retail NV or generate 4.8% return on investment over 90 days.

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

Grupo Aval Acciones  vs.  Vastned Retail NV

Grupo Aval Acciones

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Aval Acciones are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Grupo Aval reported solid returns over the last few months and may actually be approaching a breakup point.

Vastned Retail NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vastned Retail NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Vastned Retail is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Grupo Aval and Vastned Retail

The main advantage of trading using opposite Grupo Aval and Vastned Retail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Aval position performs unexpectedly, Vastned Retail 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 Vastned Retail will offset losses from the drop in Vastned Retail's long position.

The idea behind Grupo Aval Acciones and Vastned Retail NV 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.