Correlation Between Grupo Aval and Air Transport
Can any of the company-specific risk be diversified away by investing in both Grupo Aval and Air Transport 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 Air Transport 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 Air Transport Services, you can compare the effects of market volatilities on Grupo Aval and Air Transport 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 Air Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo Aval and Air Transport.
Diversification Opportunities for Grupo Aval and Air Transport
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Grupo and Air is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Aval Acciones and Air Transport Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Transport Services 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 Air Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Transport Services has no effect on the direction of Grupo Aval i.e., Grupo Aval and Air Transport go up and down completely randomly.
Pair Corralation between Grupo Aval and Air Transport
Assuming the 90 days trading horizon Grupo Aval is expected to generate 8.46 times less return on investment than Air Transport. But when comparing it to its historical volatility, Grupo Aval Acciones is 1.56 times less risky than Air Transport. It trades about 0.01 of its potential returns per unit of risk. Air Transport Services is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,350 in Air Transport Services on August 29, 2024 and sell it today you would earn a total of 730.00 from holding Air Transport Services or generate 54.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Grupo Aval Acciones vs. Air Transport Services
Performance |
| Timeline |
| Grupo Aval Acciones |
| Air Transport Services |
Grupo Aval and Air Transport Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Grupo Aval and Air Transport
The main advantage of trading using opposite Grupo Aval and Air Transport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Aval position performs unexpectedly, Air Transport 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 Air Transport will offset losses from the drop in Air Transport's long position.The idea behind Grupo Aval Acciones and Air Transport Services 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.| Air Transport vs. GEAR4MUSIC LS 10 | Air Transport vs. Harmony Gold Mining | Air Transport vs. REVO INSURANCE SPA | Air Transport vs. Webster Financial |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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