Correlation Between Waste Management and Afya
Can any of the company-specific risk be diversified away by investing in both Waste Management 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 Waste Management and Afya into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waste Management and Afya, you can compare the effects of market volatilities on Waste Management 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 Waste Management with a short position of Afya. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and Afya.
Diversification Opportunities for Waste Management and Afya
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Waste and Afya is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Afya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afya and Waste Management 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 Waste Management 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 Waste Management i.e., Waste Management and Afya go up and down completely randomly.
Pair Corralation between Waste Management and Afya
Allowing for the 90-day total investment horizon Waste Management is expected to generate 0.45 times more return on investment than Afya. However, Waste Management is 2.23 times less risky than Afya. It trades about 0.07 of its potential returns per unit of risk. Afya is currently generating about 0.02 per unit of risk. If you would invest 16,206 in Waste Management on September 3, 2024 and sell it today you would earn a total of 6,616 from holding Waste Management or generate 40.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Waste Management vs. Afya
Performance |
| Timeline |
| Waste Management |
| Afya |
Waste Management and Afya Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waste Management and Afya
The main advantage of trading using opposite Waste Management and Afya positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management 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.| Waste Management vs. Waste Connections | Waste Management vs. Clean Harbors | Waste Management vs. Casella Waste Systems | Waste Management vs. Gfl Environmental Holdings |
| Afya vs. Adtalem Global Education | Afya vs. Laureate Education | Afya vs. American Public 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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