Correlation Between Afya and Lixiang Education

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

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

Diversification Opportunities for Afya and Lixiang Education

-0.2

Correlation Coefficient

Afya  Lixiang Education

Good diversification

The 3 months correlation between Afya and Lixiang is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Afya and Lixiang Education Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lixiang Education Holding 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 Lixiang Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lixiang Education Holding has no effect on the direction of Afya i.e., Afya and Lixiang Education go up and down completely randomly.

Pair Corralation between Afya and Lixiang Education

Given the investment horizon of 90 days Afya is expected to generate 33.28 times less return on investment than Lixiang Education. But when comparing it to its historical volatility, Afya is 4.89 times less risky than Lixiang Education. It trades about 0.01 of its potential returns per unit of risk. Lixiang Education Holding is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  540.00  in Lixiang Education Holding on September 26, 2024 and sell it today you would lose (13.00) from holding Lixiang Education Holding or give up 2.41% of portfolio value over 90 days.

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

Afya  vs.  Lixiang Education Holding

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 latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Lixiang Education Holding

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lixiang Education Holding are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical and fundamental indicators, Lixiang Education demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Afya and Lixiang Education

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

The idea behind Afya and Lixiang Education Holding 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.