Correlation Between Five Below and Adtalem Global

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

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

Diversification Opportunities for Five Below and Adtalem Global

0.45

Correlation Coefficient

Five Below  Adtalem Global

Very weak diversification

The 3 months correlation between Five and Adtalem is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Five Below and Adtalem Global Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adtalem Global Education and Five Below 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 Five Below are associated (or correlated) with Adtalem Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adtalem Global Education has no effect on the direction of Five Below i.e., Five Below and Adtalem Global go up and down completely randomly.

Pair Corralation between Five Below and Adtalem Global

Assuming the 90 days horizon Five Below is expected to under-perform the Adtalem Global. In addition to that, Five Below is 1.09 times more volatile than Adtalem Global Education. It trades about -0.04 of its total potential returns per unit of risk. Adtalem Global Education is currently generating about 0.09 per unit of volatility. If you would invest  3,500  in Adtalem Global Education on October 23, 2024 and sell it today you would earn a total of  5,700  from holding Adtalem Global Education or generate 162.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Five Below  vs.  Adtalem Global Education

Five Below

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Five Below are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Five Below may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Adtalem Global Education

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Adtalem Global Education are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Adtalem Global unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Five Below and Adtalem Global

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

The idea behind Five Below and Adtalem Global Education 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.