Correlation Between Afya and REDFLEX HOLDINGS

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

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

Diversification Opportunities for Afya and REDFLEX HOLDINGS

0.09

Correlation Coefficient

Afya  REDFLEX HOLDINGS

Significant diversification

The 3 months correlation between Afya and REDFLEX is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Afya and REDFLEX HOLDINGS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REDFLEX HOLDINGS LTD 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 REDFLEX HOLDINGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REDFLEX HOLDINGS LTD has no effect on the direction of Afya i.e., Afya and REDFLEX HOLDINGS go up and down completely randomly.

Pair Corralation between Afya and REDFLEX HOLDINGS

Given the investment horizon of 90 days Afya is expected to generate 0.14 times more return on investment than REDFLEX HOLDINGS. However, Afya is 7.34 times less risky than REDFLEX HOLDINGS. It trades about -0.22 of its potential returns per unit of risk. REDFLEX HOLDINGS LTD is currently generating about -0.27 per unit of risk. If you would invest  1,796  in Afya on September 12, 2024 and sell it today you would lose (191.00) from holding Afya or give up 10.63% of portfolio value over 90 days.

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

Afya  vs.  REDFLEX HOLDINGS LTD

Afya

Risk-Adjusted Performance

0 of 100

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.

REDFLEX HOLDINGS LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days REDFLEX HOLDINGS LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, REDFLEX HOLDINGS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Afya and REDFLEX HOLDINGS

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

The idea behind Afya and REDFLEX HOLDINGS LTD 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.