Correlation Between Strategic Education and LOréal SA
Can any of the company-specific risk be diversified away by investing in both Strategic Education and LOréal SA 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 LOréal SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Strategic Education and LOral SA, you can compare the effects of market volatilities on Strategic Education and LOréal SA 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 LOréal SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Education and LOréal SA.
Diversification Opportunities for Strategic Education and LOréal SA
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Strategic and LOréal is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Education and LOral SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOréal SA 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 LOréal SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOréal SA has no effect on the direction of Strategic Education i.e., Strategic Education and LOréal SA go up and down completely randomly.
Pair Corralation between Strategic Education and LOréal SA
Assuming the 90 days horizon Strategic Education is expected to generate 1.55 times more return on investment than LOréal SA. However, Strategic Education is 1.55 times more volatile than LOral SA. It trades about 0.02 of its potential returns per unit of risk. LOral SA is currently generating about 0.0 per unit of risk. If you would invest 7,979 in Strategic Education on October 20, 2024 and sell it today you would earn a total of 1,121 from holding Strategic Education or generate 14.05% 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. LOral SA
Performance |
| Timeline |
| Strategic Education |
| LOréal SA |
Strategic Education and LOréal SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Strategic Education and LOréal SA
The main advantage of trading using opposite Strategic Education and LOréal SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Education position performs unexpectedly, LOréal SA 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 LOréal SA will offset losses from the drop in LOréal SA's long position.| Strategic Education vs. PNC Financial Services | Strategic Education vs. Sims Metal Management | Strategic Education vs. Jupiter Fund Management | Strategic Education vs. CeoTronics AG |
| LOréal SA vs. Strategic Education | LOréal SA vs. Advanced Medical Solutions | LOréal SA vs. Peijia Medical Limited | LOréal SA vs. Urban Outfitters |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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