Correlation Between Union Electric and Afya
Can any of the company-specific risk be diversified away by investing in both Union Electric 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 Union Electric and Afya into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Union Electric and Afya, you can compare the effects of market volatilities on Union Electric 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 Union Electric with a short position of Afya. Check out your portfolio center. Please also check ongoing floating volatility patterns of Union Electric and Afya.
Diversification Opportunities for Union Electric and Afya
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Union and Afya is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Union Electric and Afya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afya and Union Electric 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 Union Electric 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 Union Electric i.e., Union Electric and Afya go up and down completely randomly.
Pair Corralation between Union Electric and Afya
Assuming the 90 days horizon Union Electric is expected to generate 1.39 times more return on investment than Afya. However, Union Electric is 1.39 times more volatile than Afya. It trades about 0.17 of its potential returns per unit of risk. Afya is currently generating about -0.12 per unit of risk. If you would invest 10,000 in Union Electric on September 4, 2024 and sell it today you would earn a total of 1,000.00 from holding Union Electric or generate 10.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Union Electric vs. Afya
Performance |
| Timeline |
| Union Electric |
| Afya |
Union Electric and Afya Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Union Electric and Afya
The main advantage of trading using opposite Union Electric and Afya positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Union Electric 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.| Union Electric vs. Afya | Union Electric vs. NRG Energy | Union Electric vs. CenterPoint Energy | Union Electric vs. Skillful Craftsman Education |
| Afya vs. Laureate Education | Afya vs. Lincoln Educational Services | Afya vs. Adtalem Global Education | Afya vs. Strategic Education |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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