Correlation Between Salfacorp and AFP Planvital

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

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

Diversification Opportunities for Salfacorp and AFP Planvital

-0.5

Correlation Coefficient

Salfacorp  AFP Planvital

Very good diversification

The 3 months correlation between Salfacorp and AFP is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Salfacorp and AFP Planvital SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AFP Planvital SA and Salfacorp 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 Salfacorp are associated (or correlated) with AFP Planvital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AFP Planvital SA has no effect on the direction of Salfacorp i.e., Salfacorp and AFP Planvital go up and down completely randomly.

Pair Corralation between Salfacorp and AFP Planvital

Assuming the 90 days trading horizon Salfacorp is expected to generate 3.15 times less return on investment than AFP Planvital. But when comparing it to its historical volatility, Salfacorp is 3.02 times less risky than AFP Planvital. It trades about 0.11 of its potential returns per unit of risk. AFP Planvital SA is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,742  in AFP Planvital SA on September 5, 2024 and sell it today you would earn a total of  13,616  from holding AFP Planvital SA or generate 496.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	78.37%
Values	Daily Returns

Salfacorp  vs.  AFP Planvital SA

Salfacorp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Salfacorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Salfacorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Salfacorp and AFP Planvital

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

The idea behind Salfacorp and AFP Planvital 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.