Correlation Between Grupo Aval and Mühlbauer Holding
Can any of the company-specific risk be diversified away by investing in both Grupo Aval and Mühlbauer Holding 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 Mühlbauer Holding 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 Mhlbauer Holding AG, you can compare the effects of market volatilities on Grupo Aval and Mühlbauer Holding 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 Mühlbauer Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo Aval and Mühlbauer Holding.
Diversification Opportunities for Grupo Aval and Mühlbauer Holding
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Grupo and Mühlbauer is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Aval Acciones and Mhlbauer Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mühlbauer Holding 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 Mühlbauer Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mühlbauer Holding has no effect on the direction of Grupo Aval i.e., Grupo Aval and Mühlbauer Holding go up and down completely randomly.
Pair Corralation between Grupo Aval and Mühlbauer Holding
Assuming the 90 days trading horizon Grupo Aval Acciones is expected to generate 0.93 times more return on investment than Mühlbauer Holding. However, Grupo Aval Acciones is 1.07 times less risky than Mühlbauer Holding. It trades about 0.25 of its potential returns per unit of risk. Mhlbauer Holding AG is currently generating about -0.22 per unit of risk. If you would invest 174.00 in Grupo Aval Acciones on September 1, 2024 and sell it today you would earn a total of 16.00 from holding Grupo Aval Acciones or generate 9.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Grupo Aval Acciones vs. Mhlbauer Holding AG
Performance |
| Timeline |
| Grupo Aval Acciones |
| Mühlbauer Holding |
Grupo Aval and Mühlbauer Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Grupo Aval and Mühlbauer Holding
The main advantage of trading using opposite Grupo Aval and Mühlbauer Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Aval position performs unexpectedly, Mühlbauer Holding 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 Mühlbauer Holding will offset losses from the drop in Mühlbauer Holding's long position.The idea behind Grupo Aval Acciones and Mhlbauer Holding 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.| Mühlbauer Holding vs. Westinghouse Air Brake | Mühlbauer Holding vs. Algonquin Power Utilities | Mühlbauer Holding vs. BOSTON BEER A | Mühlbauer Holding vs. The Boston Beer |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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