Correlation Between Preferred Bank and Laureate Education
Can any of the company-specific risk be diversified away by investing in both Preferred Bank and Laureate Education 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 Preferred Bank and Laureate Education into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Preferred Bank and Laureate Education, you can compare the effects of market volatilities on Preferred Bank and Laureate Education 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 Preferred Bank with a short position of Laureate Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Preferred Bank and Laureate Education.
Diversification Opportunities for Preferred Bank and Laureate Education
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Preferred and Laureate is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Preferred Bank and Laureate Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laureate Education and Preferred Bank 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 Preferred Bank are associated (or correlated) with Laureate Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laureate Education has no effect on the direction of Preferred Bank i.e., Preferred Bank and Laureate Education go up and down completely randomly.
Pair Corralation between Preferred Bank and Laureate Education
Assuming the 90 days horizon Preferred Bank is expected to generate 1.32 times less return on investment than Laureate Education. In addition to that, Preferred Bank is 1.02 times more volatile than Laureate Education. It trades about 0.1 of its total potential returns per unit of risk. Laureate Education is currently generating about 0.13 per unit of volatility. If you would invest 1,280 in Laureate Education on November 3, 2024 and sell it today you would earn a total of 490.00 from holding Laureate Education or generate 38.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Preferred Bank vs. Laureate Education
Performance |
| Timeline |
| Preferred Bank |
| Laureate Education |
Preferred Bank and Laureate Education Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Preferred Bank and Laureate Education
The main advantage of trading using opposite Preferred Bank and Laureate Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Preferred Bank position performs unexpectedly, Laureate Education 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 Laureate Education will offset losses from the drop in Laureate Education's long position.| Preferred Bank vs. POSBO UNSPADRS20YC1 | Preferred Bank vs. Postal Savings Bank | Preferred Bank vs. Oversea Chinese Banking | Preferred Bank vs. UNICREDIT SPA ADR |
| Laureate Education vs. CHEMICAL INDUSTRIES | Laureate Education vs. CanSino Biologics | Laureate Education vs. ELMOS SEMICONDUCTOR | Laureate Education vs. VARIOUS EATERIES LS |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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