Correlation Between CSL and Embark Education
Can any of the company-specific risk be diversified away by investing in both CSL 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 CSL and Embark Education into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CSL and Embark Education Group, you can compare the effects of market volatilities on CSL 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 CSL with a short position of Embark Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSL and Embark Education.
Diversification Opportunities for CSL and Embark Education
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between CSL and Embark is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding CSL and Embark Education Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embark Education and CSL 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 CSL 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 CSL i.e., CSL and Embark Education go up and down completely randomly.
Pair Corralation between CSL and Embark Education
Assuming the 90 days trading horizon CSL is expected to under-perform the Embark Education. But the stock apears to be less risky and, when comparing its historical volatility, CSL is 1.97 times less risky than Embark Education. The stock trades about 0.0 of its potential returns per unit of risk. The Embark Education Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 46.00 in Embark Education Group on August 24, 2024 and sell it today you would earn a total of 35.00 from holding Embark Education Group or generate 76.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CSL vs. Embark Education Group
Performance |
| Timeline |
| CSL |
| Embark Education |
CSL and Embark Education Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CSL and Embark Education
The main advantage of trading using opposite CSL and Embark Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSL 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.The idea behind CSL and Embark Education Group 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.| Embark Education vs. Aneka Tambang Tbk | Embark Education vs. Unibail Rodamco Westfield SE | Embark Education vs. Macquarie Group | Embark Education vs. Commonwealth Bank |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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