Correlation Between Grand Canyon and Afya

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

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

Diversification Opportunities for Grand Canyon and Afya

0.29

Correlation Coefficient

Grand Canyon  Afya

Modest diversification

The 3 months correlation between Grand and Afya is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Grand Canyon Education and Afya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afya and Grand Canyon 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 Grand Canyon Education 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 Grand Canyon i.e., Grand Canyon and Afya go up and down completely randomly.

Pair Corralation between Grand Canyon and Afya

Given the investment horizon of 90 days Grand Canyon Education is expected to generate 0.87 times more return on investment than Afya. However, Grand Canyon Education is 1.14 times less risky than Afya. It trades about 0.07 of its potential returns per unit of risk. Afya is currently generating about 0.01 per unit of risk. If you would invest  14,358  in Grand Canyon Education on September 1, 2024 and sell it today you would earn a total of  2,101  from holding Grand Canyon Education or generate 14.63% return on investment over 90 days.

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

Grand Canyon Education  vs.  Afya

Grand Canyon Education

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grand Canyon Education are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Grand Canyon exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 Grand Canyon and Afya

The main advantage of trading using opposite Grand Canyon and Afya positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grand Canyon 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 Grand Canyon Education 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.