Correlation Between Afya and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Afya and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Afya and Dow Jones Industrial, you can compare the effects of market volatilities on Afya and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Afya and Dow Jones.
Diversification Opportunities for Afya and Dow Jones
Poor diversification
The 3 months correlation between Afya and Dow is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Afya and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Afya i.e., Afya and Dow Jones go up and down completely randomly.
Pair Corralation between Afya and Dow Jones
Given the investment horizon of 90 days Afya is expected to generate 3.67 times more return on investment than Dow Jones. However, Afya is 3.67 times more volatile than Dow Jones Industrial. It trades about 0.27 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.2 per unit of risk. If you would invest 1,574 in Afya on November 18, 2024 and sell it today you would earn a total of 194.00 from holding Afya or generate 12.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Afya vs. Dow Jones Industrial
Performance |
| Timeline |
Afya and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Afya
Pair trading matchups for Afya
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Afya and Dow Jones
The main advantage of trading using opposite Afya and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Afya position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Afya vs. Adtalem Global Education | Afya vs. Laureate Education | Afya vs. American Public Education | Afya vs. Strategic Education |
| Dow Jones vs. Palomar Holdings | Dow Jones vs. Mesa Air Group | Dow Jones vs. LATAM Airlines Group | Dow Jones vs. Unum Group |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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