Correlation Between KRISPY KREME and Perdoceo Education

Can any of the company-specific risk be diversified away by investing in both KRISPY KREME and Perdoceo Education 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 KRISPY KREME and Perdoceo Education into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KRISPY KREME DL 01 and Perdoceo Education, you can compare the effects of market volatilities on KRISPY KREME and Perdoceo Education 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 KRISPY KREME with a short position of Perdoceo Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of KRISPY KREME and Perdoceo Education.

Diversification Opportunities for KRISPY KREME and Perdoceo Education

0.76

Correlation Coefficient

KRISPY KREME  Perdoceo Education

Poor diversification

The 3 months correlation between KRISPY and Perdoceo is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding KRISPY KREME DL 01 and Perdoceo Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perdoceo Education and KRISPY KREME 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 KRISPY KREME DL 01 are associated (or correlated) with Perdoceo Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perdoceo Education has no effect on the direction of KRISPY KREME i.e., KRISPY KREME and Perdoceo Education go up and down completely randomly.

Pair Corralation between KRISPY KREME and Perdoceo Education

Assuming the 90 days horizon KRISPY KREME DL 01 is expected to under-perform the Perdoceo Education. In addition to that, KRISPY KREME is 2.59 times more volatile than Perdoceo Education. It trades about -0.18 of its total potential returns per unit of risk. Perdoceo Education is currently generating about -0.07 per unit of volatility. If you would invest  2,528  in Perdoceo Education on December 27, 2024 and sell it today you would lose (208.00) from holding Perdoceo Education or give up 8.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

KRISPY KREME DL 01  vs.  Perdoceo Education

KRISPY KREME DL

Risk-Adjusted Performance

Very Weak

Over the last 90 days KRISPY KREME DL 01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Perdoceo Education

Risk-Adjusted Performance

Very Weak

Over the last 90 days Perdoceo Education has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with KRISPY KREME and Perdoceo Education

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

The idea behind KRISPY KREME DL 01 and Perdoceo 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.