Correlation Between CHINA EAST and Grand Canyon
Can any of the company-specific risk be diversified away by investing in both CHINA EAST and Grand Canyon 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 CHINA EAST and Grand Canyon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHINA EAST ED and Grand Canyon Education, you can compare the effects of market volatilities on CHINA EAST and Grand Canyon 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 CHINA EAST with a short position of Grand Canyon. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA EAST and Grand Canyon.
Diversification Opportunities for CHINA EAST and Grand Canyon
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between CHINA and Grand is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding CHINA EAST ED and Grand Canyon Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grand Canyon Education and CHINA EAST 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 CHINA EAST ED are associated (or correlated) with Grand Canyon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grand Canyon Education has no effect on the direction of CHINA EAST i.e., CHINA EAST and Grand Canyon go up and down completely randomly.
Pair Corralation between CHINA EAST and Grand Canyon
Assuming the 90 days horizon CHINA EAST ED is expected to generate 1.73 times more return on investment than Grand Canyon. However, CHINA EAST is 1.73 times more volatile than Grand Canyon Education. It trades about 0.07 of its potential returns per unit of risk. Grand Canyon Education is currently generating about 0.08 per unit of risk. If you would invest 26.00 in CHINA EAST ED on September 27, 2024 and sell it today you would earn a total of 6.00 from holding CHINA EAST ED or generate 23.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHINA EAST ED vs. Grand Canyon Education
Performance |
| Timeline |
| CHINA EAST ED |
| Grand Canyon Education |
CHINA EAST and Grand Canyon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHINA EAST and Grand Canyon
The main advantage of trading using opposite CHINA EAST and Grand Canyon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA EAST position performs unexpectedly, Grand Canyon 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 Grand Canyon will offset losses from the drop in Grand Canyon's long position.| CHINA EAST vs. IDP EDUCATION LTD | CHINA EAST vs. TAL Education Group | CHINA EAST vs. Grand Canyon Education | CHINA EAST vs. Graham Holdings Co |
| Grand Canyon vs. IDP EDUCATION LTD | Grand Canyon vs. TAL Education Group | Grand Canyon vs. Graham Holdings Co | Grand Canyon vs. Strategic Education |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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