Correlation Between Alphabet and Grupo Aval

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

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

Diversification Opportunities for Alphabet and Grupo Aval

0.6

Correlation Coefficient

Alphabet  Grupo Aval

Poor diversification

The 3 months correlation between Alphabet and Grupo is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C 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 Alphabet 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 Alphabet Inc Class C 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 Alphabet i.e., Alphabet and Grupo Aval go up and down completely randomly.

Pair Corralation between Alphabet and Grupo Aval

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 0.92 times more return on investment than Grupo Aval. However, Alphabet Inc Class C is 1.09 times less risky than Grupo Aval. It trades about 0.09 of its potential returns per unit of risk. Grupo Aval Acciones is currently generating about 0.02 per unit of risk. If you would invest  13,761  in Alphabet Inc Class C on September 14, 2024 and sell it today you would earn a total of  5,518  from holding Alphabet Inc Class C or generate 40.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.81%
Values	Daily Returns

Alphabet Inc Class C  vs.  Grupo Aval Acciones

Alphabet Class C

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

Grupo Aval Acciones

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Aval Acciones are ranked lower than 9 (%) 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.

Pair Trading with Alphabet and Grupo Aval

The main advantage of trading using opposite Alphabet and Grupo Aval positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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 Alphabet Inc Class C 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.