Correlation Between United States and Afya

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

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

Diversification Opportunities for United States and Afya

0.63

Correlation Coefficient

United States  Afya

Poor diversification

The 3 months correlation between United and Afya is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Afya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afya and United States 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 United States Steel 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 United States i.e., United States and Afya go up and down completely randomly.

Pair Corralation between United States and Afya

Taking into account the 90-day investment horizon United States Steel is expected to under-perform the Afya. In addition to that, United States is 1.19 times more volatile than Afya. It trades about -0.05 of its total potential returns per unit of risk. Afya is currently generating about -0.05 per unit of volatility. If you would invest  2,129  in Afya on September 25, 2024 and sell it today you would lose (579.00) from holding Afya or give up 27.2% of portfolio value over 90 days.

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

United States Steel  vs.  Afya

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company 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 United States and Afya

The main advantage of trading using opposite United States and Afya positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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 United States Steel 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.