Correlation Between Afya and Daily Journal

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

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

Diversification Opportunities for Afya and Daily Journal

-0.13

Correlation Coefficient

Afya  Daily Journal

Good diversification

The 3 months correlation between Afya and Daily is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Afya and Daily Journal Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daily Journal Corp 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 Daily Journal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daily Journal Corp has no effect on the direction of Afya i.e., Afya and Daily Journal go up and down completely randomly.

Pair Corralation between Afya and Daily Journal

Given the investment horizon of 90 days Afya is expected to under-perform the Daily Journal. But the stock apears to be less risky and, when comparing its historical volatility, Afya is 1.48 times less risky than Daily Journal. The stock trades about -0.02 of its potential returns per unit of risk. The Daily Journal Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  48,296  in Daily Journal Corp on October 22, 2024 and sell it today you would earn a total of  1,478  from holding Daily Journal Corp or generate 3.06% return on investment over 90 days.

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

Afya  vs.  Daily Journal Corp

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.

Daily Journal Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Daily Journal Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Daily Journal is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Afya and Daily Journal

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

The idea behind Afya and Daily Journal Corp 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.