Correlation Between Afya and Oaktree Acquisition

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

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

Diversification Opportunities for Afya and Oaktree Acquisition

-0.44

Correlation Coefficient

Afya  Oaktree Acquisition

Very good diversification

The 3 months correlation between Afya and Oaktree is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Afya and Oaktree Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oaktree Acquisition 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 Oaktree Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oaktree Acquisition Corp has no effect on the direction of Afya i.e., Afya and Oaktree Acquisition go up and down completely randomly.

Pair Corralation between Afya and Oaktree Acquisition

Given the investment horizon of 90 days Afya is expected to under-perform the Oaktree Acquisition. In addition to that, Afya is 10.97 times more volatile than Oaktree Acquisition Corp. It trades about -0.15 of its total potential returns per unit of risk. Oaktree Acquisition Corp is currently generating about 0.22 per unit of volatility. If you would invest  1,008  in Oaktree Acquisition Corp on October 11, 2024 and sell it today you would earn a total of  8.00  from holding Oaktree Acquisition Corp or generate 0.79% return on investment over 90 days.

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

Afya  vs.  Oaktree Acquisition 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 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.

Oaktree Acquisition Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Oaktree Acquisition Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Oaktree Acquisition is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Afya and Oaktree Acquisition

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

The idea behind Afya and Oaktree Acquisition 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.