Correlation Between Afya and Bt Brands

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

By analyzing existing cross correlation between Afya and Bt Brands, you can compare the effects of market volatilities on Afya and Bt Brands 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 Bt Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Afya and Bt Brands.

Diversification Opportunities for Afya and Bt Brands

0.15

Correlation Coefficient

Afya  Bt Brands

Average diversification

The 3 months correlation between Afya and BTBD is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Afya and Bt Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bt Brands 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 Bt Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bt Brands has no effect on the direction of Afya i.e., Afya and Bt Brands go up and down completely randomly.

Pair Corralation between Afya and Bt Brands

Given the investment horizon of 90 days Afya is expected to under-perform the Bt Brands. But the stock apears to be less risky and, when comparing its historical volatility, Afya is 2.47 times less risky than Bt Brands. The stock trades about -0.07 of its potential returns per unit of risk. The Bt Brands is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  246.00  in Bt Brands on September 20, 2024 and sell it today you would lose (82.00) from holding Bt Brands or give up 33.33% of portfolio value over 90 days.

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

Afya  vs.  Bt Brands

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 latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Bt Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bt Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Bt Brands is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Afya and Bt Brands

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

The idea behind Afya and Bt Brands 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.