Correlation Between AFP Habitat and AFP Provida

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

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

Diversification Opportunities for AFP Habitat and AFP Provida

0.95

Correlation Coefficient

AFP Habitat  AFP Provida

Almost no diversification

The 3 months correlation between AFP and AFP is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding AFP Habitat and AFP Provida in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AFP Provida and AFP Habitat 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 AFP Habitat are associated (or correlated) with AFP Provida. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AFP Provida has no effect on the direction of AFP Habitat i.e., AFP Habitat and AFP Provida go up and down completely randomly.

Pair Corralation between AFP Habitat and AFP Provida

Assuming the 90 days trading horizon AFP Habitat is expected to generate 1.57 times less return on investment than AFP Provida. But when comparing it to its historical volatility, AFP Habitat is 1.88 times less risky than AFP Provida. It trades about 0.38 of its potential returns per unit of risk. AFP Provida is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  300,000  in AFP Provida on December 30, 2024 and sell it today you would earn a total of  139,900  from holding AFP Provida or generate 46.63% return on investment over 90 days.

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

AFP Habitat  vs.  AFP Provida

AFP Habitat

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in AFP Habitat are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, AFP Habitat unveiled solid returns over the last few months and may actually be approaching a breakup point.

AFP Provida

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AFP Provida are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, AFP Provida sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AFP Habitat and AFP Provida

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

The idea behind AFP Habitat and AFP Provida 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.