Correlation Between Bancolombia and Foreign Trade
Can any of the company-specific risk be diversified away by investing in both Bancolombia and Foreign Trade 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 Bancolombia and Foreign Trade into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bancolombia SA ADR and Foreign Trade Bank, you can compare the effects of market volatilities on Bancolombia and Foreign Trade 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 Bancolombia with a short position of Foreign Trade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bancolombia and Foreign Trade.
Diversification Opportunities for Bancolombia and Foreign Trade
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bancolombia and Foreign is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Bancolombia SA ADR and Foreign Trade Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foreign Trade Bank and Bancolombia 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 Bancolombia SA ADR are associated (or correlated) with Foreign Trade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foreign Trade Bank has no effect on the direction of Bancolombia i.e., Bancolombia and Foreign Trade go up and down completely randomly.
Pair Corralation between Bancolombia and Foreign Trade
Considering the 90-day investment horizon Bancolombia SA ADR is expected to generate 1.43 times more return on investment than Foreign Trade. However, Bancolombia is 1.43 times more volatile than Foreign Trade Bank. It trades about 0.56 of its potential returns per unit of risk. Foreign Trade Bank is currently generating about 0.12 per unit of risk. If you would invest 3,199 in Bancolombia SA ADR on November 4, 2024 and sell it today you would earn a total of 756.00 from holding Bancolombia SA ADR or generate 23.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bancolombia SA ADR vs. Foreign Trade Bank
Performance |
| Timeline |
| Bancolombia SA ADR |
| Foreign Trade Bank |
Bancolombia and Foreign Trade Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bancolombia and Foreign Trade
The main advantage of trading using opposite Bancolombia and Foreign Trade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bancolombia position performs unexpectedly, Foreign Trade 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 Foreign Trade will offset losses from the drop in Foreign Trade's long position.| Bancolombia vs. Shinhan Financial Group | Bancolombia vs. Woori Financial Group | Bancolombia vs. Korea Electric Power | Bancolombia vs. Orix Corp Ads |
| Foreign Trade vs. Banco Santander Chile | Foreign Trade vs. Bancolombia SA ADR | Foreign Trade vs. Banco Bradesco SA | Foreign Trade vs. Credicorp |
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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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