Correlation Between NorthWestern and Afya
Can any of the company-specific risk be diversified away by investing in both NorthWestern and Afya 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 NorthWestern and Afya into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NorthWestern and Afya, you can compare the effects of market volatilities on NorthWestern and Afya 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 NorthWestern with a short position of Afya. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorthWestern and Afya.
Diversification Opportunities for NorthWestern and Afya
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NorthWestern and Afya is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding NorthWestern and Afya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afya and NorthWestern 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 NorthWestern are associated (or correlated) with Afya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Afya has no effect on the direction of NorthWestern i.e., NorthWestern and Afya go up and down completely randomly.
Pair Corralation between NorthWestern and Afya
Considering the 90-day investment horizon NorthWestern is expected to generate 0.68 times more return on investment than Afya. However, NorthWestern is 1.47 times less risky than Afya. It trades about 0.05 of its potential returns per unit of risk. Afya is currently generating about 0.0 per unit of risk. If you would invest 5,391 in NorthWestern on August 31, 2024 and sell it today you would earn a total of 81.00 from holding NorthWestern or generate 1.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NorthWestern vs. Afya
Performance |
| Timeline |
| NorthWestern |
| Afya |
NorthWestern and Afya Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorthWestern and Afya
The main advantage of trading using opposite NorthWestern and Afya positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorthWestern position performs unexpectedly, Afya 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 Afya will offset losses from the drop in Afya's long position.| NorthWestern vs. Allete Inc | NorthWestern vs. Black Hills | NorthWestern vs. Otter Tail | NorthWestern vs. Avista |
| Afya vs. Lincoln Educational Services | Afya vs. Aquagold International | Afya vs. Thrivent High Yield | Afya vs. Morningstar Unconstrained Allocation |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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