Correlation Between Salfacorp and AFP Habitat

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

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

Diversification Opportunities for Salfacorp and AFP Habitat

0.94

Correlation Coefficient

Salfacorp  AFP Habitat

Almost no diversification

The 3 months correlation between Salfacorp and AFP is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Salfacorp and AFP Habitat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AFP Habitat and Salfacorp 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 Salfacorp are associated (or correlated) with AFP Habitat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AFP Habitat has no effect on the direction of Salfacorp i.e., Salfacorp and AFP Habitat go up and down completely randomly.

Pair Corralation between Salfacorp and AFP Habitat

Assuming the 90 days trading horizon Salfacorp is expected to generate 1.94 times less return on investment than AFP Habitat. In addition to that, Salfacorp is 1.01 times more volatile than AFP Habitat. It trades about 0.22 of its total potential returns per unit of risk. AFP Habitat is currently generating about 0.43 per unit of volatility. If you would invest  80,906  in AFP Habitat on December 2, 2024 and sell it today you would earn a total of  25,004  from holding AFP Habitat or generate 30.91% return on investment over 90 days.

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

Salfacorp  vs.  AFP Habitat

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.

AFP Habitat

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in AFP Habitat are ranked lower than 33 (%) 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.

Pair Trading with Salfacorp and AFP Habitat

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

The idea behind Salfacorp and AFP Habitat 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.