Correlation Between Grupo Aval and Novozymes

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

By analyzing existing cross correlation between Grupo Aval and Novozymes AS, you can compare the effects of market volatilities on Grupo Aval and Novozymes 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 Novozymes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo Aval and Novozymes.

Diversification Opportunities for Grupo Aval and Novozymes

-0.58

Correlation Coefficient

Grupo Aval  Novozymes

Excellent diversification

The 3 months correlation between Grupo and Novozymes is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Aval and Novozymes AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novozymes AS 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 are associated (or correlated) with Novozymes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novozymes AS has no effect on the direction of Grupo Aval i.e., Grupo Aval and Novozymes go up and down completely randomly.

Pair Corralation between Grupo Aval and Novozymes

Given the investment horizon of 90 days Grupo Aval is expected to generate 1.02 times more return on investment than Novozymes. However, Grupo Aval is 1.02 times more volatile than Novozymes AS. It trades about 0.08 of its potential returns per unit of risk. Novozymes AS is currently generating about -0.16 per unit of risk. If you would invest  201.00  in Grupo Aval on September 13, 2024 and sell it today you would earn a total of  14.00  from holding Grupo Aval or generate 6.97% return on investment over 90 days.

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

Grupo Aval  vs.  Novozymes AS

Grupo Aval

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Aval are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Grupo Aval may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Novozymes AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Novozymes AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Grupo Aval and Novozymes

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

The idea behind Grupo Aval and Novozymes AS 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.