Correlation Between Laureate Education and Sempra

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Can any of the company-specific risk be diversified away by investing in both Laureate Education and Sempra 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 Sempra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Laureate Education and Sempra, you can compare the effects of market volatilities on Laureate Education and Sempra 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 Sempra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Laureate Education and Sempra.

Diversification Opportunities for Laureate Education and Sempra

0.9
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Laureate and Sempra is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Laureate Education and Sempra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sempra 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 Sempra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sempra has no effect on the direction of Laureate Education i.e., Laureate Education and Sempra go up and down completely randomly.

Pair Corralation between Laureate Education and Sempra

Assuming the 90 days trading horizon Laureate Education is expected to generate 1.55 times more return on investment than Sempra. However, Laureate Education is 1.55 times more volatile than Sempra. It trades about 0.08 of its potential returns per unit of risk. Sempra is currently generating about 0.1 per unit of risk. If you would invest  1,250  in Laureate Education on September 4, 2024 and sell it today you would earn a total of  530.00  from holding Laureate Education or generate 42.4% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Laureate Education  vs.  Sempra

 Performance 
       Timeline  
Laureate Education 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Laureate Education are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Laureate Education reported solid returns over the last few months and may actually be approaching a breakup point.
Sempra 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Sempra are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sempra reported solid returns over the last few months and may actually be approaching a breakup point.

Laureate Education and Sempra Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Laureate Education and Sempra

The main advantage of trading using opposite Laureate Education and Sempra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Laureate Education position performs unexpectedly, Sempra 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 Sempra will offset losses from the drop in Sempra's long position.
The idea behind Laureate Education and Sempra 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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