Correlation Between AFP Planvital and Salfacorp

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

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

Diversification Opportunities for AFP Planvital and Salfacorp

0.92

Correlation Coefficient

AFP Planvital  Salfacorp

Almost no diversification

The 3 months correlation between AFP and Salfacorp is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding AFP Planvital SA and Salfacorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salfacorp and AFP Planvital 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 Planvital SA are associated (or correlated) with Salfacorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salfacorp has no effect on the direction of AFP Planvital i.e., AFP Planvital and Salfacorp go up and down completely randomly.

Pair Corralation between AFP Planvital and Salfacorp

Assuming the 90 days trading horizon AFP Planvital SA is expected to generate 1.01 times more return on investment than Salfacorp. However, AFP Planvital is 1.01 times more volatile than Salfacorp. It trades about 0.34 of its potential returns per unit of risk. Salfacorp is currently generating about 0.22 per unit of risk. If you would invest  15,637  in AFP Planvital SA on December 2, 2024 and sell it today you would earn a total of  3,703  from holding AFP Planvital SA or generate 23.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	96.83%
Values	Daily Returns

AFP Planvital SA  vs.  Salfacorp

AFP Planvital SA

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in AFP Planvital SA are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, AFP Planvital unveiled solid returns over the last few months and may actually be approaching a breakup point.

Salfacorp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Salfacorp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Salfacorp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AFP Planvital and Salfacorp

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

The idea behind AFP Planvital SA and Salfacorp 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..