Correlation Between Adtalem Global and Lixiang Education

Can any of the company-specific risk be diversified away by investing in both Adtalem Global and Lixiang Education 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 Adtalem Global and Lixiang Education into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Adtalem Global Education and Lixiang Education Holding, you can compare the effects of market volatilities on Adtalem Global and Lixiang Education 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 Adtalem Global with a short position of Lixiang Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adtalem Global and Lixiang Education.

Diversification Opportunities for Adtalem Global and Lixiang Education

-0.26

Correlation Coefficient

Adtalem Global  Lixiang Education

Very good diversification

The 3 months correlation between Adtalem and Lixiang is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Adtalem Global Education and Lixiang Education Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lixiang Education Holding and Adtalem Global 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 Adtalem Global Education are associated (or correlated) with Lixiang Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lixiang Education Holding has no effect on the direction of Adtalem Global i.e., Adtalem Global and Lixiang Education go up and down completely randomly.

Pair Corralation between Adtalem Global and Lixiang Education

Given the investment horizon of 90 days Adtalem Global is expected to generate 177.03 times less return on investment than Lixiang Education. But when comparing it to its historical volatility, Adtalem Global Education is 5.57 times less risky than Lixiang Education. It trades about 0.01 of its potential returns per unit of risk. Lixiang Education Holding is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  238.00  in Lixiang Education Holding on September 28, 2024 and sell it today you would earn a total of  275.00  from holding Lixiang Education Holding or generate 115.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Adtalem Global Education  vs.  Lixiang Education Holding

Adtalem Global Education

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Adtalem Global Education are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical and fundamental indicators, Adtalem Global exhibited solid returns over the last few months and may actually be approaching a breakup point.

Lixiang Education Holding

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lixiang Education Holding are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical and fundamental indicators, Lixiang Education demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Adtalem Global and Lixiang Education

The main advantage of trading using opposite Adtalem Global and Lixiang Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adtalem Global position performs unexpectedly, Lixiang Education 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 Lixiang Education will offset losses from the drop in Lixiang Education's long position.

The idea behind Adtalem Global Education and Lixiang Education Holding 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.

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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.