Correlation Between Grupo Aval and Adidas AG
Can any of the company-specific risk be diversified away by investing in both Grupo Aval and Adidas AG 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 Adidas AG 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 adidas AG, you can compare the effects of market volatilities on Grupo Aval and Adidas AG 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 Adidas AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo Aval and Adidas AG.
Diversification Opportunities for Grupo Aval and Adidas AG
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Grupo and Adidas is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Aval Acciones and adidas AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on adidas AG 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 Adidas AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of adidas AG has no effect on the direction of Grupo Aval i.e., Grupo Aval and Adidas AG go up and down completely randomly.
Pair Corralation between Grupo Aval and Adidas AG
Assuming the 90 days trading horizon Grupo Aval Acciones is expected to generate 0.72 times more return on investment than Adidas AG. However, Grupo Aval Acciones is 1.4 times less risky than Adidas AG. It trades about 0.1 of its potential returns per unit of risk. adidas AG is currently generating about -0.02 per unit of risk. If you would invest 175.00 in Grupo Aval Acciones on September 3, 2024 and sell it today you would earn a total of 15.00 from holding Grupo Aval Acciones or generate 8.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Grupo Aval Acciones vs. adidas AG
Performance |
| Timeline |
| Grupo Aval Acciones |
| adidas AG |
Grupo Aval and Adidas AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Grupo Aval and Adidas AG
The main advantage of trading using opposite Grupo Aval and Adidas AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Aval position performs unexpectedly, Adidas AG 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 Adidas AG will offset losses from the drop in Adidas AG's long position.The idea behind Grupo Aval Acciones and adidas AG 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.| Adidas AG vs. Scandinavian Tobacco Group | Adidas AG vs. NAKED WINES PLC | Adidas AG vs. Goodyear Tire Rubber | Adidas AG vs. SANOK RUBBER ZY |
Check out your portfolio center.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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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