Correlation Between AGF Management and Grupo Aval

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

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

Diversification Opportunities for AGF Management and Grupo Aval

0.68

Correlation Coefficient

AGF Management  Grupo Aval

Poor diversification

The 3 months correlation between AGF and Grupo is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding AGF Management Limited 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 AGF Management 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 AGF Management Limited 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 AGF Management i.e., AGF Management and Grupo Aval go up and down completely randomly.

Pair Corralation between AGF Management and Grupo Aval

Assuming the 90 days horizon AGF Management Limited is expected to under-perform the Grupo Aval. But the stock apears to be less risky and, when comparing its historical volatility, AGF Management Limited is 1.56 times less risky than Grupo Aval. The stock trades about -0.02 of its potential returns per unit of risk. The Grupo Aval Acciones is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  187.00  in Grupo Aval Acciones on September 16, 2024 and sell it today you would earn a total of  9.00  from holding Grupo Aval Acciones or generate 4.81% return on investment over 90 days.

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

AGF Management Limited  vs.  Grupo Aval Acciones

AGF Management

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AGF Management Limited are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AGF Management reported solid returns over the last few months and may actually be approaching a breakup point.

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. 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 AGF Management and Grupo Aval

The main advantage of trading using opposite AGF Management and Grupo Aval positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AGF Management 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 AGF Management Limited 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.