Correlation Between Husqvarna and Grupo Aval

Can any of the company-specific risk be diversified away by investing in both Husqvarna and Grupo Aval 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 Husqvarna and Grupo Aval into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Husqvarna AB and Grupo Aval, you can compare the effects of market volatilities on Husqvarna and Grupo Aval 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 Husqvarna with a short position of Grupo Aval. Check out your portfolio center. Please also check ongoing floating volatility patterns of Husqvarna and Grupo Aval.

Diversification Opportunities for Husqvarna and Grupo Aval

-0.02

Correlation Coefficient

Husqvarna Grupo Aval

Good diversification

The 3 months correlation between Husqvarna and Grupo is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Husqvarna AB and Grupo Aval in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Aval and Husqvarna 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 Husqvarna AB are associated (or correlated) with Grupo Aval. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Aval has no effect on the direction of Husqvarna i.e., Husqvarna and Grupo Aval go up and down completely randomly.

Pair Corralation between Husqvarna and Grupo Aval

Assuming the 90 days horizon Husqvarna AB is expected to generate 1.18 times more return on investment than Grupo Aval. However, Husqvarna is 1.18 times more volatile than Grupo Aval. It trades about -0.02 of its potential returns per unit of risk. Grupo Aval is currently generating about -0.07 per unit of risk. If you would invest  2,638  in Husqvarna AB on December 23, 2022 and sell it today you would lose (988.00)  from holding Husqvarna AB or give up 37.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Husqvarna AB  vs.  Grupo Aval

Husqvarna AB

Husqvarna Performance

8 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Husqvarna AB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Husqvarna showed solid returns over the last few months and may actually be approaching a breakup point.

Grupo Aval

Grupo Performance

0 of 100

Over the last 90 days Grupo Aval has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Grupo Aval is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Husqvarna and Grupo Aval

The main advantage of trading using opposite Husqvarna and Grupo Aval positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Husqvarna position performs unexpectedly, Grupo Aval 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 Grupo Aval will offset losses from the drop in Grupo Aval's long position.

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The idea behind Husqvarna AB and Grupo Aval 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.

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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 ETF Directory module to find actively traded Exchange Traded Funds (ETF) from around the world.