Correlation Between Afya and AMREP

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

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

Diversification Opportunities for Afya and AMREP

-0.22

Correlation Coefficient

Afya  AMREP

Very good diversification

The 3 months correlation between Afya and AMREP is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Afya and AMREP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMREP 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 AMREP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMREP has no effect on the direction of Afya i.e., Afya and AMREP go up and down completely randomly.

Pair Corralation between Afya and AMREP

Given the investment horizon of 90 days Afya is expected to generate 0.59 times more return on investment than AMREP. However, Afya is 1.71 times less risky than AMREP. It trades about -0.19 of its potential returns per unit of risk. AMREP is currently generating about -0.12 per unit of risk. If you would invest  1,686  in Afya on September 24, 2024 and sell it today you would lose (136.00) from holding Afya or give up 8.07% of portfolio value over 90 days.

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

Afya  vs.  AMREP

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 newest stock price disturbance, may contribute to short-term losses for the investors.

AMREP

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AMREP are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, AMREP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Afya and AMREP

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

The idea behind Afya and AMREP 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.