Correlation Between AFC Ajax and Benfica

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

By analyzing existing cross correlation between AFC Ajax NV and Benfica, you can compare the effects of market volatilities on AFC Ajax and Benfica 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 AFC Ajax with a short position of Benfica. Check out your portfolio center. Please also check ongoing floating volatility patterns of AFC Ajax and Benfica.

Diversification Opportunities for AFC Ajax and Benfica

0.06

Correlation Coefficient

AFC Ajax  Benfica

Significant diversification

The 3 months correlation between AFC and Benfica is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding AFC Ajax NV and Benfica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benfica and AFC Ajax 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 AFC Ajax NV are associated (or correlated) with Benfica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benfica has no effect on the direction of AFC Ajax i.e., AFC Ajax and Benfica go up and down completely randomly.

Pair Corralation between AFC Ajax and Benfica

Assuming the 90 days trading horizon AFC Ajax NV is expected to under-perform the Benfica. But the stock apears to be less risky and, when comparing its historical volatility, AFC Ajax NV is 2.76 times less risky than Benfica. The stock trades about -0.03 of its potential returns per unit of risk. The Benfica is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  323.00  in Benfica on October 20, 2024 and sell it today you would lose (3.00) from holding Benfica or give up 0.93% of portfolio value over 90 days.

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

AFC Ajax NV  vs.  Benfica

AFC Ajax NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AFC Ajax NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AFC Ajax is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Benfica

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Benfica has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Benfica is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with AFC Ajax and Benfica

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

The idea behind AFC Ajax NV and Benfica 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.