Correlation Between Strategic Education and ITV Plc
Can any of the company-specific risk be diversified away by investing in both Strategic Education and ITV Plc 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 Strategic Education and ITV Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Strategic Education and ITV plc, you can compare the effects of market volatilities on Strategic Education and ITV Plc 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 Strategic Education with a short position of ITV Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Education and ITV Plc.
Diversification Opportunities for Strategic Education and ITV Plc
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Strategic and ITV is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Education and ITV plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITV plc and Strategic 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 Strategic Education are associated (or correlated) with ITV Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITV plc has no effect on the direction of Strategic Education i.e., Strategic Education and ITV Plc go up and down completely randomly.
Pair Corralation between Strategic Education and ITV Plc
Assuming the 90 days horizon Strategic Education is expected to generate 0.83 times more return on investment than ITV Plc. However, Strategic Education is 1.21 times less risky than ITV Plc. It trades about 0.05 of its potential returns per unit of risk. ITV plc is currently generating about 0.02 per unit of risk. If you would invest 6,818 in Strategic Education on August 25, 2024 and sell it today you would earn a total of 2,082 from holding Strategic Education or generate 30.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Strategic Education vs. ITV plc
Performance |
| Timeline |
| Strategic Education |
| ITV plc |
Strategic Education and ITV Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Strategic Education and ITV Plc
The main advantage of trading using opposite Strategic Education and ITV Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Education position performs unexpectedly, ITV Plc 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 ITV Plc will offset losses from the drop in ITV Plc's long position.The idea behind Strategic Education and ITV plc 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.| ITV Plc vs. American Eagle Outfitters | ITV Plc vs. Strategic Education | ITV Plc vs. STRAYER EDUCATION | ITV Plc vs. Coeur Mining |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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