Correlation Between Afine Investments and Deneb Investments

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

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

Diversification Opportunities for Afine Investments and Deneb Investments

-0.08

Correlation Coefficient

Afine Investments  Deneb Investments

Good diversification

The 3 months correlation between Afine and Deneb is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Afine Investments and Deneb Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deneb Investments and Afine Investments 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 Afine Investments are associated (or correlated) with Deneb Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deneb Investments has no effect on the direction of Afine Investments i.e., Afine Investments and Deneb Investments go up and down completely randomly.

Pair Corralation between Afine Investments and Deneb Investments

Assuming the 90 days trading horizon Afine Investments is expected to under-perform the Deneb Investments. But the stock apears to be less risky and, when comparing its historical volatility, Afine Investments is 1.76 times less risky than Deneb Investments. The stock trades about -0.05 of its potential returns per unit of risk. The Deneb Investments is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  20,200  in Deneb Investments on December 29, 2024 and sell it today you would earn a total of  1,700  from holding Deneb Investments or generate 8.42% return on investment over 90 days.

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

Afine Investments  vs.  Deneb Investments

Afine Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days Afine Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Afine Investments is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Deneb Investments

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Deneb Investments are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Deneb Investments may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Afine Investments and Deneb Investments

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

The idea behind Afine Investments and Deneb Investments 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.