Correlation Between Benfica and AFC Ajax

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

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

Diversification Opportunities for Benfica and AFC Ajax

0.06

Correlation Coefficient

Benfica  AFC Ajax

Significant diversification

The 3 months correlation between Benfica and AFC is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Benfica and AFC Ajax NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AFC Ajax NV and Benfica 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 Benfica are associated (or correlated) with AFC Ajax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AFC Ajax NV has no effect on the direction of Benfica i.e., Benfica and AFC Ajax go up and down completely randomly.

Pair Corralation between Benfica and AFC Ajax

Assuming the 90 days trading horizon Benfica is expected to generate 2.76 times more return on investment than AFC Ajax. However, Benfica is 2.76 times more volatile than AFC Ajax NV. It trades about 0.01 of its potential returns per unit of risk. AFC Ajax NV is currently generating about -0.03 per unit of risk. If you would invest  323.00  in Benfica on October 20, 2024 and sell it today you would lose (3.00) from holding Benfica or give up 0.93% of portfolio value over 90 days.

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

Benfica  vs.  AFC Ajax NV

Benfica

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Benfica has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Benfica is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

AFC Ajax NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AFC Ajax NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AFC Ajax is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Benfica and AFC Ajax

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

The idea behind Benfica and AFC Ajax NV 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.