Correlation Between Oaktree Acquisition and Afya

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

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

Diversification Opportunities for Oaktree Acquisition and Afya

-0.31

Correlation Coefficient

Oaktree Acquisition  Afya

Very good diversification

The 3 months correlation between Oaktree and Afya is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Oaktree Acquisition Corp and Afya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afya and Oaktree Acquisition 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 Oaktree Acquisition Corp 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 Oaktree Acquisition i.e., Oaktree Acquisition and Afya go up and down completely randomly.

Pair Corralation between Oaktree Acquisition and Afya

Assuming the 90 days horizon Oaktree Acquisition Corp is expected to generate 0.12 times more return on investment than Afya. However, Oaktree Acquisition Corp is 8.45 times less risky than Afya. It trades about 0.07 of its potential returns per unit of risk. Afya is currently generating about -0.15 per unit of risk. If you would invest  1,014  in Oaktree Acquisition Corp on October 10, 2024 and sell it today you would earn a total of  3.00  from holding Oaktree Acquisition Corp or generate 0.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Oaktree Acquisition Corp  vs.  Afya

Oaktree Acquisition Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Oaktree Acquisition Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Oaktree Acquisition is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the 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 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 Oaktree Acquisition and Afya

The main advantage of trading using opposite Oaktree Acquisition and Afya positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oaktree Acquisition 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 Oaktree Acquisition Corp 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.