Correlation Between AFP Capital and Multiexport Foods

Can any of the company-specific risk be diversified away by investing in both AFP Capital and Multiexport Foods 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 AFP Capital and Multiexport Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AFP Capital SA and Multiexport Foods SA, you can compare the effects of market volatilities on AFP Capital and Multiexport Foods 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 AFP Capital with a short position of Multiexport Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of AFP Capital and Multiexport Foods.

Diversification Opportunities for AFP Capital and Multiexport Foods

0.18

Correlation Coefficient

AFP Capital  Multiexport Foods

Average diversification

The 3 months correlation between AFP and Multiexport is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding AFP Capital SA and Multiexport Foods SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multiexport Foods and AFP Capital 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 AFP Capital SA are associated (or correlated) with Multiexport Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multiexport Foods has no effect on the direction of AFP Capital i.e., AFP Capital and Multiexport Foods go up and down completely randomly.

Pair Corralation between AFP Capital and Multiexport Foods

Assuming the 90 days trading horizon AFP Capital SA is expected to generate 0.98 times more return on investment than Multiexport Foods. However, AFP Capital SA is 1.02 times less risky than Multiexport Foods. It trades about 0.21 of its potential returns per unit of risk. Multiexport Foods SA is currently generating about -0.02 per unit of risk. If you would invest  19,710  in AFP Capital SA on September 12, 2024 and sell it today you would earn a total of  5,290  from holding AFP Capital SA or generate 26.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	24.17%
Values	Daily Returns

AFP Capital SA  vs.  Multiexport Foods SA

AFP Capital SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AFP Capital SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, AFP Capital is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Multiexport Foods

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Multiexport Foods SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting essential indicators, Multiexport Foods may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with AFP Capital and Multiexport Foods

The main advantage of trading using opposite AFP Capital and Multiexport Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AFP Capital position performs unexpectedly, Multiexport Foods 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 Multiexport Foods will offset losses from the drop in Multiexport Foods' long position.

The idea behind AFP Capital SA and Multiexport Foods SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.