Correlation Between Graham Holdings and Chegg

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

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

Diversification Opportunities for Graham Holdings and Chegg

0.77

Correlation Coefficient

Graham Holdings  Chegg

Poor diversification

The 3 months correlation between Graham and Chegg is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Graham Holdings Co and Chegg Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chegg Inc and Graham Holdings 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 Graham Holdings Co are associated (or correlated) with Chegg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chegg Inc has no effect on the direction of Graham Holdings i.e., Graham Holdings and Chegg go up and down completely randomly.

Pair Corralation between Graham Holdings and Chegg

Assuming the 90 days trading horizon Graham Holdings is expected to generate 1.64 times less return on investment than Chegg. But when comparing it to its historical volatility, Graham Holdings Co is 2.6 times less risky than Chegg. It trades about 0.12 of its potential returns per unit of risk. Chegg Inc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  148.00  in Chegg Inc on September 23, 2024 and sell it today you would earn a total of  28.00  from holding Chegg Inc or generate 18.92% return on investment over 90 days.

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

Graham Holdings Co  vs.  Chegg Inc

Graham Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Graham Holdings Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Graham Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Chegg Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chegg Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Chegg reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Graham Holdings and Chegg

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

The idea behind Graham Holdings Co and Chegg Inc 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.