Correlation Between Afya and Aris Water

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

By analyzing existing cross correlation between Afya and Aris Water Solutions, you can compare the effects of market volatilities on Afya and Aris Water 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 Afya with a short position of Aris Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of Afya and Aris Water.

Diversification Opportunities for Afya and Aris Water

-0.31

Correlation Coefficient

Afya  Aris Water

Very good diversification

The 3 months correlation between Afya and Aris is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Afya and Aris Water Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aris Water Solutions and Afya 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 Afya are associated (or correlated) with Aris Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aris Water Solutions has no effect on the direction of Afya i.e., Afya and Aris Water go up and down completely randomly.

Pair Corralation between Afya and Aris Water

Given the investment horizon of 90 days Afya is expected to under-perform the Aris Water. But the stock apears to be less risky and, when comparing its historical volatility, Afya is 2.22 times less risky than Aris Water. The stock trades about -0.05 of its potential returns per unit of risk. The Aris Water Solutions is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,680  in Aris Water Solutions on September 28, 2024 and sell it today you would earn a total of  854.00  from holding Aris Water Solutions or generate 50.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Afya  vs.  Aris Water Solutions

Afya

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Afya has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Afya is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Aris Water Solutions

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aris Water Solutions are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Aris Water unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Afya and Aris Water

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

The idea behind Afya and Aris Water Solutions 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.

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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.