Correlation Between Aurania Resources and Afya

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

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

Diversification Opportunities for Aurania Resources and Afya

0.04

Correlation Coefficient

Aurania Resources  Afya

Significant diversification

The 3 months correlation between Aurania and Afya is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Aurania Resources and Afya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afya and Aurania Resources 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 Aurania Resources are associated (or correlated) with Afya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Afya has no effect on the direction of Aurania Resources i.e., Aurania Resources and Afya go up and down completely randomly.

Pair Corralation between Aurania Resources and Afya

Assuming the 90 days horizon Aurania Resources is expected to under-perform the Afya. In addition to that, Aurania Resources is 2.27 times more volatile than Afya. It trades about -0.43 of its total potential returns per unit of risk. Afya is currently generating about -0.19 per unit of volatility. If you would invest  1,763  in Afya on September 4, 2024 and sell it today you would lose (167.00) from holding Afya or give up 9.47% of portfolio value over 90 days.

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

Aurania Resources  vs.  Afya

Aurania Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aurania Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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.

Pair Trading with Aurania Resources and Afya

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

The idea behind Aurania Resources and Afya 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.