Correlation Between Afya and Occidental

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

By analyzing existing cross correlation between Afya and Occidental Petroleum 44, you can compare the effects of market volatilities on Afya and Occidental 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 Occidental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Afya and Occidental.

Diversification Opportunities for Afya and Occidental

0.34

Correlation Coefficient

Afya  Occidental

Weak diversification

The 3 months correlation between Afya and Occidental is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Afya and Occidental Petroleum 44 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Occidental Petroleum 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 Occidental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Occidental Petroleum has no effect on the direction of Afya i.e., Afya and Occidental go up and down completely randomly.

Pair Corralation between Afya and Occidental

Given the investment horizon of 90 days Afya is expected to under-perform the Occidental. But the stock apears to be less risky and, when comparing its historical volatility, Afya is 1.72 times less risky than Occidental. The stock trades about -0.05 of its potential returns per unit of risk. The Occidental Petroleum 44 is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  7,406  in Occidental Petroleum 44 on October 23, 2024 and sell it today you would earn a total of  1,169  from holding Occidental Petroleum 44 or generate 15.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	75.0%
Values	Daily Returns

Afya  vs.  Occidental Petroleum 44

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 recent stock price disturbance, may contribute to short-term losses for the investors.

Occidental Petroleum

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Occidental Petroleum 44 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Occidental sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Afya and Occidental

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

The idea behind Afya and Occidental Petroleum 44 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.