Correlation Between Grupo Aval and Heidelberg Materials
Can any of the company-specific risk be diversified away by investing in both Grupo Aval and Heidelberg Materials 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 Heidelberg Materials 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 Heidelberg Materials AG, you can compare the effects of market volatilities on Grupo Aval and Heidelberg Materials 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 Heidelberg Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo Aval and Heidelberg Materials.
Diversification Opportunities for Grupo Aval and Heidelberg Materials
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Grupo and Heidelberg is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Aval Acciones and Heidelberg Materials AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heidelberg Materials 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 Heidelberg Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heidelberg Materials has no effect on the direction of Grupo Aval i.e., Grupo Aval and Heidelberg Materials go up and down completely randomly.
Pair Corralation between Grupo Aval and Heidelberg Materials
Assuming the 90 days trading horizon Grupo Aval Acciones is expected to under-perform the Heidelberg Materials. But the stock apears to be less risky and, when comparing its historical volatility, Grupo Aval Acciones is 1.18 times less risky than Heidelberg Materials. The stock trades about -0.06 of its potential returns per unit of risk. The Heidelberg Materials AG is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 11,830 in Heidelberg Materials AG on September 22, 2024 and sell it today you would earn a total of 65.00 from holding Heidelberg Materials AG or generate 0.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Grupo Aval Acciones vs. Heidelberg Materials AG
Performance |
| Timeline |
| Grupo Aval Acciones |
| Heidelberg Materials |
Grupo Aval and Heidelberg Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Grupo Aval and Heidelberg Materials
The main advantage of trading using opposite Grupo Aval and Heidelberg Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Aval position performs unexpectedly, Heidelberg Materials 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 Heidelberg Materials will offset losses from the drop in Heidelberg Materials' long position.The idea behind Grupo Aval Acciones and Heidelberg Materials 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.| Heidelberg Materials vs. Apple Inc | Heidelberg Materials vs. Apple Inc | Heidelberg Materials vs. Apple Inc | Heidelberg Materials vs. Apple Inc |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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