Correlation Between EMBARK EDUCATION and Big 5

Can any of the company-specific risk be diversified away by investing in both EMBARK EDUCATION and Big 5 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 EMBARK EDUCATION and Big 5 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between EMBARK EDUCATION LTD and Big 5 Sporting, you can compare the effects of market volatilities on EMBARK EDUCATION and Big 5 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 EMBARK EDUCATION with a short position of Big 5. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMBARK EDUCATION and Big 5.

Diversification Opportunities for EMBARK EDUCATION and Big 5

-0.14

Correlation Coefficient

EMBARK EDUCATION  Big 5

Good diversification

The 3 months correlation between EMBARK and Big is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding EMBARK EDUCATION LTD and Big 5 Sporting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big 5 Sporting and EMBARK 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 EMBARK EDUCATION LTD are associated (or correlated) with Big 5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big 5 Sporting has no effect on the direction of EMBARK EDUCATION i.e., EMBARK EDUCATION and Big 5 go up and down completely randomly.

Pair Corralation between EMBARK EDUCATION and Big 5

Assuming the 90 days horizon EMBARK EDUCATION LTD is expected to generate 0.09 times more return on investment than Big 5. However, EMBARK EDUCATION LTD is 10.62 times less risky than Big 5. It trades about 0.13 of its potential returns per unit of risk. Big 5 Sporting is currently generating about -0.01 per unit of risk. If you would invest  30.00  in EMBARK EDUCATION LTD on August 31, 2024 and sell it today you would earn a total of  1.00  from holding EMBARK EDUCATION LTD or generate 3.33% return on investment over 90 days.

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

EMBARK EDUCATION LTD  vs.  Big 5 Sporting

EMBARK EDUCATION LTD

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EMBARK EDUCATION LTD are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, EMBARK EDUCATION is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Big 5 Sporting

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big 5 Sporting has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Big 5 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with EMBARK EDUCATION and Big 5

The main advantage of trading using opposite EMBARK EDUCATION and Big 5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMBARK EDUCATION position performs unexpectedly, Big 5 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 Big 5 will offset losses from the drop in Big 5's long position.

The idea behind EMBARK EDUCATION LTD and Big 5 Sporting 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.