Correlation Between Laureate Education and CHINA EAST
Can any of the company-specific risk be diversified away by investing in both Laureate Education and CHINA EAST 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 CHINA EAST into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Laureate Education and CHINA EAST ED, you can compare the effects of market volatilities on Laureate Education and CHINA EAST 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 CHINA EAST. Check out your portfolio center. Please also check ongoing floating volatility patterns of Laureate Education and CHINA EAST.
Diversification Opportunities for Laureate Education and CHINA EAST
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Laureate and CHINA is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Laureate Education and CHINA EAST ED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA EAST ED 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 CHINA EAST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA EAST ED has no effect on the direction of Laureate Education i.e., Laureate Education and CHINA EAST go up and down completely randomly.
Pair Corralation between Laureate Education and CHINA EAST
Assuming the 90 days trading horizon Laureate Education is expected to generate 0.7 times more return on investment than CHINA EAST. However, Laureate Education is 1.42 times less risky than CHINA EAST. It trades about 0.1 of its potential returns per unit of risk. CHINA EAST ED is currently generating about 0.07 per unit of risk. If you would invest 1,330 in Laureate Education on September 27, 2024 and sell it today you would earn a total of 420.00 from holding Laureate Education or generate 31.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Laureate Education vs. CHINA EAST ED
Performance |
| Timeline |
| Laureate Education |
| CHINA EAST ED |
Laureate Education and CHINA EAST Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Laureate Education and CHINA EAST
The main advantage of trading using opposite Laureate Education and CHINA EAST positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Laureate Education position performs unexpectedly, CHINA EAST 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 CHINA EAST will offset losses from the drop in CHINA EAST's long position.| Laureate Education vs. Gaztransport Technigaz SA | Laureate Education vs. American Eagle Outfitters | Laureate Education vs. JD SPORTS FASH | Laureate Education vs. COLUMBIA SPORTSWEAR |
| CHINA EAST vs. IDP EDUCATION LTD | CHINA EAST vs. TAL Education Group | CHINA EAST vs. Grand Canyon Education | CHINA EAST vs. Graham Holdings Co |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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