Correlation Between AFP Planvital and Multiexport Foods

Can any of the company-specific risk be diversified away by investing in both AFP Planvital and Multiexport Foods 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 Multiexport Foods 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 Multiexport Foods SA, you can compare the effects of market volatilities on AFP Planvital and Multiexport Foods 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 Multiexport Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of AFP Planvital and Multiexport Foods.

Diversification Opportunities for AFP Planvital and Multiexport Foods

0.58

Correlation Coefficient

AFP Planvital  Multiexport Foods

Very weak diversification

The 3 months correlation between AFP and Multiexport is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding AFP Planvital SA and Multiexport Foods SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multiexport Foods 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 Multiexport Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multiexport Foods has no effect on the direction of AFP Planvital i.e., AFP Planvital and Multiexport Foods go up and down completely randomly.

Pair Corralation between AFP Planvital and Multiexport Foods

Assuming the 90 days trading horizon AFP Planvital SA is expected to under-perform the Multiexport Foods. But the stock apears to be less risky and, when comparing its historical volatility, AFP Planvital SA is 10.55 times less risky than Multiexport Foods. The stock trades about -0.21 of its potential returns per unit of risk. The Multiexport Foods SA is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  18,809  in Multiexport Foods SA on September 4, 2024 and sell it today you would earn a total of  1,588  from holding Multiexport Foods SA or generate 8.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	66.1%
Values	Daily Returns

AFP Planvital SA  vs.  Multiexport Foods 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.

Multiexport Foods

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Multiexport Foods SA are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting essential indicators, Multiexport Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AFP Planvital and Multiexport Foods

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

The idea behind AFP Planvital SA and Multiexport Foods 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.

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 the ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.