Correlation Between IDP EDUCATION and ACCO BRANDS

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

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

Diversification Opportunities for IDP EDUCATION and ACCO BRANDS

-0.08

Correlation Coefficient

IDP EDUCATION  ACCO BRANDS

Good diversification

The 3 months correlation between IDP and ACCO is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding IDP EDUCATION LTD and ACCO BRANDS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACCO BRANDS and IDP 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 IDP EDUCATION LTD are associated (or correlated) with ACCO BRANDS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACCO BRANDS has no effect on the direction of IDP EDUCATION i.e., IDP EDUCATION and ACCO BRANDS go up and down completely randomly.

Pair Corralation between IDP EDUCATION and ACCO BRANDS

Assuming the 90 days horizon IDP EDUCATION LTD is expected to under-perform the ACCO BRANDS. In addition to that, IDP EDUCATION is 1.51 times more volatile than ACCO BRANDS. It trades about -0.02 of its total potential returns per unit of risk. ACCO BRANDS is currently generating about 0.11 per unit of volatility. If you would invest  440.00  in ACCO BRANDS on October 25, 2024 and sell it today you would earn a total of  70.00  from holding ACCO BRANDS or generate 15.91% return on investment over 90 days.

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

IDP EDUCATION LTD  vs.  ACCO BRANDS

IDP EDUCATION LTD

Risk-Adjusted Performance

0 of 100

Very Weak

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

ACCO BRANDS

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ACCO BRANDS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental drivers, ACCO BRANDS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IDP EDUCATION and ACCO BRANDS

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

The idea behind IDP EDUCATION LTD and ACCO BRANDS 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.