Correlation Between Afya and Burlington Stores

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

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

Diversification Opportunities for Afya and Burlington Stores

-0.76

Correlation Coefficient

Afya  Burlington Stores

Pay attention - limited upside

The 3 months correlation between Afya and Burlington is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Afya and Burlington Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burlington Stores 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 Burlington Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burlington Stores has no effect on the direction of Afya i.e., Afya and Burlington Stores go up and down completely randomly.

Pair Corralation between Afya and Burlington Stores

Given the investment horizon of 90 days Afya is expected to generate 0.89 times more return on investment than Burlington Stores. However, Afya is 1.12 times less risky than Burlington Stores. It trades about 0.1 of its potential returns per unit of risk. Burlington Stores is currently generating about -0.1 per unit of risk. If you would invest  1,591  in Afya on December 26, 2024 and sell it today you would earn a total of  216.00  from holding Afya or generate 13.58% return on investment over 90 days.

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

Afya  vs.  Burlington Stores

Afya

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Afya are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Afya sustained solid returns over the last few months and may actually be approaching a breakup point.

Burlington Stores

Risk-Adjusted Performance

Very Weak

Over the last 90 days Burlington Stores has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Afya and Burlington Stores

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

The idea behind Afya and Burlington Stores 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.