Correlation Between Afya and Toro

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

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

Diversification Opportunities for Afya and Toro

-0.57

Correlation Coefficient

Afya  Toro

Excellent diversification

The 3 months correlation between Afya and Toro is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Afya and Toro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toro 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 Toro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toro has no effect on the direction of Afya i.e., Afya and Toro go up and down completely randomly.

Pair Corralation between Afya and Toro

Given the investment horizon of 90 days Afya is expected to generate 0.99 times more return on investment than Toro. However, Afya is 1.01 times less risky than Toro. It trades about 0.13 of its potential returns per unit of risk. Toro is currently generating about -0.14 per unit of risk. If you would invest  1,513  in Afya on December 17, 2024 and sell it today you would earn a total of  290.00  from holding Afya or generate 19.17% 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.  Toro

Afya

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Afya are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Afya sustained solid returns over the last few months and may actually be approaching a breakup point.

Toro

Risk-Adjusted Performance

Very Weak

Over the last 90 days Toro has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Afya and Toro

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

The idea behind Afya and Toro 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.