Correlation Between Equitable Holdings and Perdoceo Education

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

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

Diversification Opportunities for Equitable Holdings and Perdoceo Education

0.85

Correlation Coefficient

Equitable Holdings  Perdoceo Education

Very poor diversification

The 3 months correlation between Equitable and Perdoceo is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Equitable Holdings and Perdoceo Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perdoceo Education and Equitable Holdings 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 Equitable Holdings 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 Equitable Holdings i.e., Equitable Holdings and Perdoceo Education go up and down completely randomly.

Pair Corralation between Equitable Holdings and Perdoceo Education

Assuming the 90 days horizon Equitable Holdings is expected to generate 1.02 times less return on investment than Perdoceo Education. But when comparing it to its historical volatility, Equitable Holdings is 1.55 times less risky than Perdoceo Education. It trades about 0.11 of its potential returns per unit of risk. Perdoceo Education is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,650  in Perdoceo Education on October 5, 2024 and sell it today you would earn a total of  850.00  from holding Perdoceo Education or generate 51.52% return on investment over 90 days.

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

Equitable Holdings  vs.  Perdoceo Education

Equitable Holdings

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Equitable Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Equitable Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Perdoceo Education

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Perdoceo Education has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Perdoceo Education reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Equitable Holdings and Perdoceo Education

The main advantage of trading using opposite Equitable Holdings and Perdoceo Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equitable Holdings 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 Equitable Holdings 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.