Correlation Between Graham Holdings and COGNA EDUCACAO

Can any of the company-specific risk be diversified away by investing in both Graham Holdings and COGNA EDUCACAO 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 COGNA EDUCACAO 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 COGNA EDUCACAO SPADR, you can compare the effects of market volatilities on Graham Holdings and COGNA EDUCACAO 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 COGNA EDUCACAO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Graham Holdings and COGNA EDUCACAO.

Diversification Opportunities for Graham Holdings and COGNA EDUCACAO

0.17

Correlation Coefficient

Graham Holdings  COGNA EDUCACAO

Average diversification

The 3 months correlation between Graham and COGNA is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Graham Holdings Co and COGNA EDUCACAO SPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COGNA EDUCACAO SPADR 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 COGNA EDUCACAO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COGNA EDUCACAO SPADR has no effect on the direction of Graham Holdings i.e., Graham Holdings and COGNA EDUCACAO go up and down completely randomly.

Pair Corralation between Graham Holdings and COGNA EDUCACAO

Assuming the 90 days trading horizon Graham Holdings is expected to generate 5.27 times less return on investment than COGNA EDUCACAO. But when comparing it to its historical volatility, Graham Holdings Co is 6.7 times less risky than COGNA EDUCACAO. It trades about 0.06 of its potential returns per unit of risk. COGNA EDUCACAO SPADR is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  30.00  in COGNA EDUCACAO SPADR on September 23, 2024 and sell it today you would lose (12.00) from holding COGNA EDUCACAO SPADR or give up 40.0% of portfolio value over 90 days.

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

Graham Holdings Co  vs.  COGNA EDUCACAO SPADR

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.

COGNA EDUCACAO SPADR

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in COGNA EDUCACAO SPADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, COGNA EDUCACAO reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Graham Holdings and COGNA EDUCACAO

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

The idea behind Graham Holdings Co and COGNA EDUCACAO SPADR 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.