Correlation Between Coles and Embark Education
Can any of the company-specific risk be diversified away by investing in both Coles and Embark 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 Coles and Embark Education into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coles Group and Embark Education Group, you can compare the effects of market volatilities on Coles and Embark 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 Coles with a short position of Embark Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coles and Embark Education.
Diversification Opportunities for Coles and Embark Education
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Coles and Embark is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Coles Group and Embark Education Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embark Education and Coles 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 Coles Group are associated (or correlated) with Embark Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embark Education has no effect on the direction of Coles i.e., Coles and Embark Education go up and down completely randomly.
Pair Corralation between Coles and Embark Education
Assuming the 90 days trading horizon Coles Group is expected to generate 0.5 times more return on investment than Embark Education. However, Coles Group is 2.0 times less risky than Embark Education. It trades about 0.11 of its potential returns per unit of risk. Embark Education Group is currently generating about 0.06 per unit of risk. If you would invest 1,939 in Coles Group on November 28, 2024 and sell it today you would earn a total of 27.00 from holding Coles Group or generate 1.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Coles Group vs. Embark Education Group
Performance |
| Timeline |
| Coles Group |
| Embark Education |
Coles and Embark Education Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coles and Embark Education
The main advantage of trading using opposite Coles and Embark Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coles position performs unexpectedly, Embark 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 Embark Education will offset losses from the drop in Embark Education's long position.| Coles vs. Southern Cross Media | Coles vs. Queste Communications | Coles vs. Nine Entertainment Co | Coles vs. Computershare |
| Embark Education vs. Cleanaway Waste Management | Embark Education vs. Macquarie Bank Limited | Embark Education vs. Bank of Queensland | Embark Education vs. Westpac Banking |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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