Correlation Between EMBARK EDUCATION and FirstGroup Plc

Can any of the company-specific risk be diversified away by investing in both EMBARK EDUCATION and FirstGroup Plc 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 FirstGroup Plc 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 FirstGroup plc, you can compare the effects of market volatilities on EMBARK EDUCATION and FirstGroup Plc 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 FirstGroup Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMBARK EDUCATION and FirstGroup Plc.

Diversification Opportunities for EMBARK EDUCATION and FirstGroup Plc

0.09

Correlation Coefficient

EMBARK EDUCATION  FirstGroup Plc

Significant diversification

The 3 months correlation between EMBARK and FirstGroup is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding EMBARK EDUCATION LTD and FirstGroup plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FirstGroup plc 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 FirstGroup Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FirstGroup plc has no effect on the direction of EMBARK EDUCATION i.e., EMBARK EDUCATION and FirstGroup Plc go up and down completely randomly.

Pair Corralation between EMBARK EDUCATION and FirstGroup Plc

Assuming the 90 days horizon EMBARK EDUCATION is expected to generate 80.17 times less return on investment than FirstGroup Plc. But when comparing it to its historical volatility, EMBARK EDUCATION LTD is 2.34 times less risky than FirstGroup Plc. It trades about 0.0 of its potential returns per unit of risk. FirstGroup plc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  199.00  in FirstGroup plc on December 23, 2024 and sell it today you would earn a total of  17.00  from holding FirstGroup plc or generate 8.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

EMBARK EDUCATION LTD  vs.  FirstGroup plc

EMBARK EDUCATION LTD

Risk-Adjusted Performance

Very Weak

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

FirstGroup plc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FirstGroup plc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FirstGroup Plc may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with EMBARK EDUCATION and FirstGroup Plc

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

The idea behind EMBARK EDUCATION LTD and FirstGroup plc 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.