Correlation Between Afya and Allient

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

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

Diversification Opportunities for Afya and Allient

-0.36

Correlation Coefficient

Afya  Allient

Very good diversification

The 3 months correlation between Afya and Allient is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Afya and Allient in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allient and Afya 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 Afya are associated (or correlated) with Allient. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allient has no effect on the direction of Afya i.e., Afya and Allient go up and down completely randomly.

Pair Corralation between Afya and Allient

Given the investment horizon of 90 days Afya is expected to under-perform the Allient. But the stock apears to be less risky and, when comparing its historical volatility, Afya is 1.44 times less risky than Allient. The stock trades about -0.05 of its potential returns per unit of risk. The Allient is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,049  in Allient on September 18, 2024 and sell it today you would earn a total of  535.00  from holding Allient or generate 26.11% return on investment over 90 days.

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

Afya  vs.  Allient

Afya

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Afya has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Afya is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Allient

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Allient are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Allient unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Afya and Allient

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

The idea behind Afya and Allient 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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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.