Correlation Between Bancolombia and Pilbara Minerals

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

By analyzing existing cross correlation between Bancolombia SA ADR and Pilbara Minerals Limited, you can compare the effects of market volatilities on Bancolombia and Pilbara Minerals 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 Bancolombia with a short position of Pilbara Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bancolombia and Pilbara Minerals.

Diversification Opportunities for Bancolombia and Pilbara Minerals

-0.47

Correlation Coefficient

Bancolombia  Pilbara Minerals

Very good diversification

The 3 months correlation between Bancolombia and Pilbara is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Bancolombia SA ADR and Pilbara Minerals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pilbara Minerals and Bancolombia 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 Bancolombia SA ADR are associated (or correlated) with Pilbara Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pilbara Minerals has no effect on the direction of Bancolombia i.e., Bancolombia and Pilbara Minerals go up and down completely randomly.

Pair Corralation between Bancolombia and Pilbara Minerals

Considering the 90-day investment horizon Bancolombia SA ADR is expected to generate 0.42 times more return on investment than Pilbara Minerals. However, Bancolombia SA ADR is 2.39 times less risky than Pilbara Minerals. It trades about 0.07 of its potential returns per unit of risk. Pilbara Minerals Limited is currently generating about -0.11 per unit of risk. If you would invest  3,100  in Bancolombia SA ADR on September 13, 2024 and sell it today you would earn a total of  188.00  from holding Bancolombia SA ADR or generate 6.06% return on investment over 90 days.

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

Bancolombia SA ADR  vs.  Pilbara Minerals Limited

Bancolombia SA ADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bancolombia SA ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Bancolombia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pilbara Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pilbara Minerals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Bancolombia and Pilbara Minerals

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

The idea behind Bancolombia SA ADR and Pilbara Minerals Limited 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.