Correlation Between Corporacion America and Lincoln Educational

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

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

Diversification Opportunities for Corporacion America and Lincoln Educational

0.01

Correlation Coefficient

Corporacion America  Lincoln Educational

Significant diversification

The 3 months correlation between Corporacion and Lincoln is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Corporacion America Airports and Lincoln Educational Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lincoln Educational and Corporacion America 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 Corporacion America Airports 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 Corporacion America i.e., Corporacion America and Lincoln Educational go up and down completely randomly.

Pair Corralation between Corporacion America and Lincoln Educational

Given the investment horizon of 90 days Corporacion America Airports is expected to under-perform the Lincoln Educational. But the stock apears to be less risky and, when comparing its historical volatility, Corporacion America Airports is 1.35 times less risky than Lincoln Educational. The stock trades about -0.01 of its potential returns per unit of risk. The Lincoln Educational Services is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,581  in Lincoln Educational Services on December 30, 2024 and sell it today you would lose (10.00) from holding Lincoln Educational Services or give up 0.63% of portfolio value over 90 days.

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

Corporacion America Airports  vs.  Lincoln Educational Services

Corporacion America

Risk-Adjusted Performance

Very Weak

Over the last 90 days Corporacion America Airports has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Corporacion America is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Corporacion America and Lincoln Educational

The main advantage of trading using opposite Corporacion America and Lincoln Educational positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Corporacion America 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 Corporacion America Airports 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.