Correlation Between Snap On and Grupo Aval

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Can any of the company-specific risk be diversified away by investing in both Snap On 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 Snap On and Grupo Aval into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap-On and Grupo Aval, you can compare the effects of market volatilities on Snap On 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 Snap On with a short position of Grupo Aval. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap On and Grupo Aval.

Diversification Opportunities for Snap On and Grupo Aval

  Correlation Coefficient

Modest diversification

The 3 months correlation between Snap On and Grupo is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Snap-On and Grupo Aval in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Aval and Snap On 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 Snap-On 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 Snap On i.e., Snap On and Grupo Aval go up and down completely randomly.

Pair Corralation between Snap On and Grupo Aval

Considering the 90-day investment horizon Snap-On is expected to generate 0.7 times more return on investment than Grupo Aval. However, Snap-On is 1.43 times less risky than Grupo Aval. It trades about 0.01 of its potential returns per unit of risk. Grupo Aval is currently generating about -0.08 per unit of risk. If you would invest  22,286  in Snap-On on December 23, 2022 and sell it today you would earn a total of  1,025  from holding Snap-On or generate 4.6% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
ValuesDaily Returns

Snap-On  vs.  Grupo Aval

 Performance (%) 

Snap On Performance

4 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Snap-On are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Snap On is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
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.

Snap On and Grupo Aval Volatility Contrast

   Predicted Return Density   

Pair Trading with Snap On and Grupo Aval

The main advantage of trading using opposite Snap On and Grupo Aval positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap On 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 Snap-On 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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