Correlation Between Strategic Education and Elite Education

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

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

Diversification Opportunities for Strategic Education and Elite Education

0.43

Correlation Coefficient

Strategic Education  Elite Education

Very weak diversification

The 3 months correlation between Strategic and Elite is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Education and Elite Education Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elite Education Group 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 Elite Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elite Education Group has no effect on the direction of Strategic Education i.e., Strategic Education and Elite Education go up and down completely randomly.

Pair Corralation between Strategic Education and Elite Education

Given the investment horizon of 90 days Strategic Education is expected to generate 10.16 times less return on investment than Elite Education. But when comparing it to its historical volatility, Strategic Education is 3.28 times less risky than Elite Education. It trades about 0.04 of its potential returns per unit of risk. Elite Education Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  72.00  in Elite Education Group on August 30, 2024 and sell it today you would earn a total of  31.00  from holding Elite Education Group or generate 43.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.31%
Values	Daily Returns

Strategic Education  vs.  Elite Education Group

Strategic Education

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Education are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Strategic Education is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Elite Education Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elite Education Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward indicators, Elite Education reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Strategic Education and Elite Education

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

The idea behind Strategic Education and Elite Education Group 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.