Correlation Between Afya and Diageo PLC
Can any of the company-specific risk be diversified away by investing in both Afya and Diageo PLC 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 Diageo PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Afya and Diageo PLC ADR, you can compare the effects of market volatilities on Afya and Diageo PLC 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 Diageo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Afya and Diageo PLC.
Diversification Opportunities for Afya and Diageo PLC
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Afya and Diageo is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Afya and Diageo PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo PLC ADR 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 Diageo PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diageo PLC ADR has no effect on the direction of Afya i.e., Afya and Diageo PLC go up and down completely randomly.
Pair Corralation between Afya and Diageo PLC
Given the investment horizon of 90 days Afya is expected to generate 1.84 times more return on investment than Diageo PLC. However, Afya is 1.84 times more volatile than Diageo PLC ADR. It trades about 0.02 of its potential returns per unit of risk. Diageo PLC ADR is currently generating about -0.05 per unit of risk. If you would invest 1,437 in Afya on September 5, 2024 and sell it today you would earn a total of 159.00 from holding Afya or generate 11.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Afya vs. Diageo PLC ADR
Performance |
| Timeline |
| Afya |
| Diageo PLC ADR |
Afya and Diageo PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Afya and Diageo PLC
The main advantage of trading using opposite Afya and Diageo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Afya position performs unexpectedly, Diageo PLC 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 Diageo PLC will offset losses from the drop in Diageo PLC's long position.| Afya vs. Adtalem Global Education | Afya vs. Laureate Education | Afya vs. American Public Education | Afya vs. Strategic Education |
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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