Correlation Between Afya and Strategic Education

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

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

Diversification Opportunities for Afya and Strategic Education

0.16

Correlation Coefficient

Afya  Strategic Education

Average diversification

The 3 months correlation between Afya and Strategic is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Afya and Strategic Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Education 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 Strategic Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Education has no effect on the direction of Afya i.e., Afya and Strategic Education go up and down completely randomly.

Pair Corralation between Afya and Strategic Education

Given the investment horizon of 90 days Afya is expected to generate 1.08 times more return on investment than Strategic Education. However, Afya is 1.08 times more volatile than Strategic Education. It trades about 0.01 of its potential returns per unit of risk. Strategic Education is currently generating about -0.05 per unit of risk. If you would invest  1,637  in Afya on September 1, 2024 and sell it today you would lose (14.00) from holding Afya or give up 0.86% of portfolio value over 90 days.

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

Afya  vs.  Strategic Education

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.

Strategic Education

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Education are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Strategic Education is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Afya and Strategic Education

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

The idea behind Afya and Strategic Education 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.