Correlation Between Talen Energy and Afya
Can any of the company-specific risk be diversified away by investing in both Talen Energy 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 Talen Energy and Afya into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Talen Energy and Afya, you can compare the effects of market volatilities on Talen Energy 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 Talen Energy with a short position of Afya. Check out your portfolio center. Please also check ongoing floating volatility patterns of Talen Energy and Afya.
Diversification Opportunities for Talen Energy and Afya
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Talen and Afya is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Talen Energy and Afya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afya and Talen Energy 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 Talen Energy 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 Talen Energy i.e., Talen Energy and Afya go up and down completely randomly.
Pair Corralation between Talen Energy and Afya
Considering the 90-day investment horizon Talen Energy is expected to generate 1.87 times more return on investment than Afya. However, Talen Energy is 1.87 times more volatile than Afya. It trades about 0.22 of its potential returns per unit of risk. Afya is currently generating about 0.02 per unit of risk. If you would invest 13,828 in Talen Energy on August 31, 2024 and sell it today you would earn a total of 7,577 from holding Talen Energy or generate 54.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Talen Energy vs. Afya
Performance |
| Timeline |
| Talen Energy |
| Afya |
Talen Energy and Afya Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Talen Energy and Afya
The main advantage of trading using opposite Talen Energy and Afya positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Talen Energy 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.| Talen Energy vs. Eastern Co | Talen Energy vs. Boyd Gaming | Talen Energy vs. The Cheesecake Factory | Talen Energy vs. Femasys |
| Afya vs. Bright Scholar Education | Afya vs. Lincoln Educational Services | Afya vs. Aquagold International | Afya vs. Thrivent High Yield |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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