Correlation Between Afya and PEPSICO

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

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

Diversification Opportunities for Afya and PEPSICO

0.16

Correlation Coefficient

Afya  PEPSICO

Average diversification

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

Pair Corralation between Afya and PEPSICO

Given the investment horizon of 90 days Afya is expected to under-perform the PEPSICO. But the stock apears to be less risky and, when comparing its historical volatility, Afya is 1.09 times less risky than PEPSICO. The stock trades about -0.03 of its potential returns per unit of risk. The PEPSICO INC is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  7,373  in PEPSICO INC on September 24, 2024 and sell it today you would earn a total of  1,121  from holding PEPSICO INC or generate 15.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	48.82%
Values	Daily Returns

Afya  vs.  PEPSICO INC

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.

PEPSICO INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PEPSICO INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for PEPSICO INC investors.

Pair Trading with Afya and PEPSICO

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

The idea behind Afya and PEPSICO INC 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.