Correlation Between Grupo Aval and Nu Holdings
Can any of the company-specific risk be diversified away by investing in both Grupo Aval and Nu Holdings 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 Nu Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grupo Aval and Nu Holdings, you can compare the effects of market volatilities on Grupo Aval and Nu Holdings 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 Nu Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo Aval and Nu Holdings.
Diversification Opportunities for Grupo Aval and Nu Holdings
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Grupo and Nu Holdings is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Aval and Nu Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nu Holdings 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 are associated (or correlated) with Nu Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nu Holdings has no effect on the direction of Grupo Aval i.e., Grupo Aval and Nu Holdings go up and down completely randomly.
Pair Corralation between Grupo Aval and Nu Holdings
Given the investment horizon of 90 days Grupo Aval is expected to generate 1.01 times less return on investment than Nu Holdings. But when comparing it to its historical volatility, Grupo Aval is 1.34 times less risky than Nu Holdings. It trades about 0.44 of its potential returns per unit of risk. Nu Holdings is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 1,024 in Nu Holdings on October 23, 2024 and sell it today you would earn a total of 124.00 from holding Nu Holdings or generate 12.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Grupo Aval vs. Nu Holdings
Performance |
| Timeline |
| Grupo Aval |
| Nu Holdings |
Grupo Aval and Nu Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Grupo Aval and Nu Holdings
The main advantage of trading using opposite Grupo Aval and Nu Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Aval position performs unexpectedly, Nu Holdings 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 Nu Holdings will offset losses from the drop in Nu Holdings' long position.| Grupo Aval vs. Banco De Chile | Grupo Aval vs. Banco Santander Chile | Grupo Aval vs. Credicorp | Grupo Aval vs. Foreign Trade Bank |
| Nu Holdings vs. JPMorgan Chase Co | Nu Holdings vs. Citigroup | Nu Holdings vs. Wells Fargo | Nu Holdings vs. Toronto Dominion Bank |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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