Correlation Between SmartStop Self and Lincoln Educational

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

By analyzing existing cross correlation between SmartStop Self Storage and Lincoln Educational Services, you can compare the effects of market volatilities on SmartStop Self and Lincoln Educational 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 SmartStop Self with a short position of Lincoln Educational. Check out your portfolio center. Please also check ongoing floating volatility patterns of SmartStop Self and Lincoln Educational.

Diversification Opportunities for SmartStop Self and Lincoln Educational

0.28

Correlation Coefficient

SmartStop Self  Lincoln Educational

Modest diversification

The 3 months correlation between SmartStop and Lincoln is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding SmartStop Self Storage and Lincoln Educational Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lincoln Educational and SmartStop Self 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 SmartStop Self Storage are associated (or correlated) with Lincoln Educational. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lincoln Educational has no effect on the direction of SmartStop Self i.e., SmartStop Self and Lincoln Educational go up and down completely randomly.

Pair Corralation between SmartStop Self and Lincoln Educational

Assuming the 90 days horizon SmartStop Self Storage is expected to under-perform the Lincoln Educational. But the pink sheet apears to be less risky and, when comparing its historical volatility, SmartStop Self Storage is 2.9 times less risky than Lincoln Educational. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Lincoln Educational Services is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,269  in Lincoln Educational Services on September 14, 2024 and sell it today you would earn a total of  333.00  from holding Lincoln Educational Services or generate 26.24% return on investment over 90 days.

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

SmartStop Self Storage  vs.  Lincoln Educational Services

SmartStop Self Storage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SmartStop Self Storage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, SmartStop Self is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Lincoln Educational

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lincoln Educational Services are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Lincoln Educational exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SmartStop Self and Lincoln Educational

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

The idea behind SmartStop Self Storage and Lincoln Educational Services 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.