Correlation Between ArcelorMittal and Afya

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

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

Diversification Opportunities for ArcelorMittal and Afya

0.55

Correlation Coefficient

ArcelorMittal  Afya

Very weak diversification

The 3 months correlation between ArcelorMittal and Afya is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA ADR and Afya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afya and ArcelorMittal 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 ArcelorMittal SA ADR 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 ArcelorMittal i.e., ArcelorMittal and Afya go up and down completely randomly.

Pair Corralation between ArcelorMittal and Afya

Allowing for the 90-day total investment horizon ArcelorMittal SA ADR is expected to under-perform the Afya. But the stock apears to be less risky and, when comparing its historical volatility, ArcelorMittal SA ADR is 1.26 times less risky than Afya. The stock trades about -0.02 of its potential returns per unit of risk. The Afya is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,575  in Afya on October 13, 2024 and sell it today you would lose (80.00) from holding Afya or give up 5.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

ArcelorMittal SA ADR  vs.  Afya

ArcelorMittal SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ArcelorMittal SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with ArcelorMittal and Afya

The main advantage of trading using opposite ArcelorMittal and Afya positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ArcelorMittal 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 ArcelorMittal SA ADR 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.