Correlation Between CAREER EDUCATION and Dermapharm Holding

Can any of the company-specific risk be diversified away by investing in both CAREER EDUCATION and Dermapharm Holding 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 CAREER EDUCATION and Dermapharm Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CAREER EDUCATION and Dermapharm Holding SE, you can compare the effects of market volatilities on CAREER EDUCATION and Dermapharm Holding 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 CAREER EDUCATION with a short position of Dermapharm Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAREER EDUCATION and Dermapharm Holding.

Diversification Opportunities for CAREER EDUCATION and Dermapharm Holding

0.8

Correlation Coefficient

CAREER EDUCATION  Dermapharm Holding

Very poor diversification

The 3 months correlation between CAREER and Dermapharm is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding CAREER EDUCATION and Dermapharm Holding SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dermapharm Holding and CAREER 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 CAREER EDUCATION are associated (or correlated) with Dermapharm Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dermapharm Holding has no effect on the direction of CAREER EDUCATION i.e., CAREER EDUCATION and Dermapharm Holding go up and down completely randomly.

Pair Corralation between CAREER EDUCATION and Dermapharm Holding

Assuming the 90 days trading horizon CAREER EDUCATION is expected to generate 1.26 times more return on investment than Dermapharm Holding. However, CAREER EDUCATION is 1.26 times more volatile than Dermapharm Holding SE. It trades about 0.18 of its potential returns per unit of risk. Dermapharm Holding SE is currently generating about 0.19 per unit of risk. If you would invest  1,871  in CAREER EDUCATION on October 11, 2024 and sell it today you would earn a total of  589.00  from holding CAREER EDUCATION or generate 31.48% return on investment over 90 days.

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

CAREER EDUCATION  vs.  Dermapharm Holding SE

CAREER EDUCATION

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CAREER EDUCATION are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, CAREER EDUCATION exhibited solid returns over the last few months and may actually be approaching a breakup point.

Dermapharm Holding

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dermapharm Holding SE are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Dermapharm Holding unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CAREER EDUCATION and Dermapharm Holding

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

The idea behind CAREER EDUCATION and Dermapharm Holding SE 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 Commodity Directory module to find actively traded commodities issued by global exchanges.