Correlation Between AFP Planvital and Hites SA

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

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

Diversification Opportunities for AFP Planvital and Hites SA

0.67

Correlation Coefficient

AFP Planvital  Hites SA

Poor diversification

The 3 months correlation between AFP and Hites is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding AFP Planvital SA and Hites SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hites SA and AFP Planvital 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 AFP Planvital SA are associated (or correlated) with Hites SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hites SA has no effect on the direction of AFP Planvital i.e., AFP Planvital and Hites SA go up and down completely randomly.

Pair Corralation between AFP Planvital and Hites SA

Assuming the 90 days trading horizon AFP Planvital SA is expected to generate 0.47 times more return on investment than Hites SA. However, AFP Planvital SA is 2.11 times less risky than Hites SA. It trades about -0.08 of its potential returns per unit of risk. Hites SA is currently generating about -0.14 per unit of risk. If you would invest  18,224  in AFP Planvital SA on September 5, 2024 and sell it today you would lose (1,866) from holding AFP Planvital SA or give up 10.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	85.83%
Values	Daily Returns

AFP Planvital SA  vs.  Hites SA

AFP Planvital SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AFP Planvital SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, AFP Planvital is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Hites SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hites SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with AFP Planvital and Hites SA

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

The idea behind AFP Planvital SA and Hites SA 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.