Correlation Between Adtalem Global and Lincoln Educational

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

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

Diversification Opportunities for Adtalem Global and Lincoln Educational

0.65

Correlation Coefficient

Adtalem Global  Lincoln Educational

Poor diversification

The 3 months correlation between Adtalem and Lincoln is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Adtalem Global Education and Lincoln Educational Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lincoln Educational and Adtalem Global 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 Adtalem Global Education are associated (or correlated) with Lincoln Educational. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lincoln Educational has no effect on the direction of Adtalem Global i.e., Adtalem Global and Lincoln Educational go up and down completely randomly.

Pair Corralation between Adtalem Global and Lincoln Educational

Given the investment horizon of 90 days Adtalem Global Education is expected to generate 0.68 times more return on investment than Lincoln Educational. However, Adtalem Global Education is 1.47 times less risky than Lincoln Educational. It trades about 0.1 of its potential returns per unit of risk. Lincoln Educational Services is currently generating about 0.02 per unit of risk. If you would invest  9,013  in Adtalem Global Education on December 29, 2024 and sell it today you would earn a total of  1,276  from holding Adtalem Global Education or generate 14.16% return on investment over 90 days.

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

Adtalem Global Education  vs.  Lincoln Educational Services

Adtalem Global Education

Risk-Adjusted Performance

OK

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

Lincoln Educational

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lincoln Educational Services are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Lincoln Educational is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Adtalem Global and Lincoln Educational

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

The idea behind Adtalem Global Education and Lincoln Educational Services 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.