Correlation Between Laureate Education and G8 EDUCATION
Can any of the company-specific risk be diversified away by investing in both Laureate Education and G8 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 Laureate Education and G8 EDUCATION into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Laureate Education and G8 EDUCATION, you can compare the effects of market volatilities on Laureate Education and G8 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 Laureate Education with a short position of G8 EDUCATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of Laureate Education and G8 EDUCATION.
Diversification Opportunities for Laureate Education and G8 EDUCATION
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Laureate and 3EAG is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Laureate Education and G8 EDUCATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G8 EDUCATION and Laureate Education 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 Laureate Education are associated (or correlated) with G8 EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G8 EDUCATION has no effect on the direction of Laureate Education i.e., Laureate Education and G8 EDUCATION go up and down completely randomly.
Pair Corralation between Laureate Education and G8 EDUCATION
Assuming the 90 days trading horizon Laureate Education is expected to generate 1.09 times more return on investment than G8 EDUCATION. However, Laureate Education is 1.09 times more volatile than G8 EDUCATION. It trades about -0.04 of its potential returns per unit of risk. G8 EDUCATION is currently generating about -0.09 per unit of risk. If you would invest 1,770 in Laureate Education on January 20, 2025 and sell it today you would lose (70.00) from holding Laureate Education or give up 3.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Laureate Education vs. G8 EDUCATION
Performance |
| Timeline |
| Laureate Education |
| G8 EDUCATION |
Laureate Education and G8 EDUCATION Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Laureate Education and G8 EDUCATION
The main advantage of trading using opposite Laureate Education and G8 EDUCATION positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Laureate Education position performs unexpectedly, G8 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 G8 EDUCATION will offset losses from the drop in G8 EDUCATION's long position.| Laureate Education vs. IDP EDUCATION LTD | Laureate Education vs. TAL Education Group | Laureate Education vs. Graham Holdings Co | Laureate Education vs. Strategic Education |
| G8 EDUCATION vs. Apple Inc | G8 EDUCATION vs. Apple Inc | G8 EDUCATION vs. Apple Inc | G8 EDUCATION vs. Apple Inc |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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