Correlation Between Carnegie Clean and Laureate Education

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

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

Diversification Opportunities for Carnegie Clean and Laureate Education

0.3

Correlation Coefficient

Carnegie Clean  Laureate Education

Weak diversification

The 3 months correlation between Carnegie and Laureate is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Carnegie Clean Energy and Laureate Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laureate Education and Carnegie Clean 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 Carnegie Clean Energy are associated (or correlated) with Laureate Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laureate Education has no effect on the direction of Carnegie Clean i.e., Carnegie Clean and Laureate Education go up and down completely randomly.

Pair Corralation between Carnegie Clean and Laureate Education

Assuming the 90 days trading horizon Carnegie Clean Energy is expected to under-perform the Laureate Education. In addition to that, Carnegie Clean is 2.13 times more volatile than Laureate Education. It trades about -0.15 of its total potential returns per unit of risk. Laureate Education is currently generating about -0.05 per unit of volatility. If you would invest  1,770  in Laureate Education on October 6, 2024 and sell it today you would lose (20.00) from holding Laureate Education or give up 1.13% of portfolio value over 90 days.

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

Carnegie Clean Energy  vs.  Laureate Education

Carnegie Clean Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carnegie Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Carnegie Clean is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Laureate Education

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Laureate Education are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Laureate Education reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carnegie Clean and Laureate Education

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

The idea behind Carnegie Clean Energy and Laureate 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.