Correlation Between Afya and Sphere Entertainment

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

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

Diversification Opportunities for Afya and Sphere Entertainment

0.58

Correlation Coefficient

Afya  Sphere Entertainment

Very weak diversification

The 3 months correlation between Afya and Sphere is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Afya and Sphere Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sphere Entertainment 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 Sphere Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sphere Entertainment has no effect on the direction of Afya i.e., Afya and Sphere Entertainment go up and down completely randomly.

Pair Corralation between Afya and Sphere Entertainment

Given the investment horizon of 90 days Afya is expected to under-perform the Sphere Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Afya is 1.32 times less risky than Sphere Entertainment. The stock trades about -0.04 of its potential returns per unit of risk. The Sphere Entertainment Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,266  in Sphere Entertainment Co on October 3, 2024 and sell it today you would earn a total of  766.00  from holding Sphere Entertainment Co or generate 23.45% return on investment over 90 days.

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

Afya  vs.  Sphere Entertainment Co

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.

Sphere Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's technical indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Afya and Sphere Entertainment

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

The idea behind Afya and Sphere Entertainment Co 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.