Correlation Between CAREER EDUCATION and HERBALIFE

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

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

Diversification Opportunities for CAREER EDUCATION and HERBALIFE

0.85

Correlation Coefficient

CAREER EDUCATION  HERBALIFE

Very poor diversification

The 3 months correlation between CAREER and HERBALIFE is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding CAREER EDUCATION and HERBALIFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HERBALIFE and CAREER 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 CAREER EDUCATION are associated (or correlated) with HERBALIFE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HERBALIFE has no effect on the direction of CAREER EDUCATION i.e., CAREER EDUCATION and HERBALIFE go up and down completely randomly.

Pair Corralation between CAREER EDUCATION and HERBALIFE

Assuming the 90 days trading horizon CAREER EDUCATION is expected to generate 0.89 times more return on investment than HERBALIFE. However, CAREER EDUCATION is 1.12 times less risky than HERBALIFE. It trades about 0.17 of its potential returns per unit of risk. HERBALIFE is currently generating about 0.09 per unit of risk. If you would invest  1,970  in CAREER EDUCATION on September 17, 2024 and sell it today you would earn a total of  610.00  from holding CAREER EDUCATION or generate 30.96% return on investment over 90 days.

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

CAREER EDUCATION  vs.  HERBALIFE

CAREER EDUCATION

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CAREER EDUCATION are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, CAREER EDUCATION exhibited solid returns over the last few months and may actually be approaching a breakup point.

HERBALIFE

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HERBALIFE are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, HERBALIFE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CAREER EDUCATION and HERBALIFE

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

The idea behind CAREER EDUCATION and HERBALIFE 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.