Correlation Between Afya and Wah Fu

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

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

Diversification Opportunities for Afya and Wah Fu

0.1

Correlation Coefficient

Afya  Wah Fu

Average diversification

The 3 months correlation between Afya and Wah is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Afya and Wah Fu Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wah Fu 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 Wah Fu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wah Fu Education has no effect on the direction of Afya i.e., Afya and Wah Fu go up and down completely randomly.

Pair Corralation between Afya and Wah Fu

Given the investment horizon of 90 days Afya is expected to under-perform the Wah Fu. But the stock apears to be less risky and, when comparing its historical volatility, Afya is 1.5 times less risky than Wah Fu. The stock trades about -0.06 of its potential returns per unit of risk. The Wah Fu Education is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  197.00  in Wah Fu Education on September 18, 2024 and sell it today you would lose (42.00) from holding Wah Fu Education or give up 21.32% of portfolio value over 90 days.

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

Afya  vs.  Wah Fu 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.

Wah Fu Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wah Fu Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Afya and Wah Fu

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

The idea behind Afya and Wah Fu 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.