Correlation Between Cogna Educacao and American Public

Can any of the company-specific risk be diversified away by investing in both Cogna Educacao and American Public 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 Cogna Educacao and American Public into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Cogna Educacao and American Public

0.09

Correlation Coefficient

Cogna Educacao  American Public

Significant diversification

The 3 months correlation between Cogna and American is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Cogna Educacao SA and American Public Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Public Education and Cogna Educacao 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 Cogna Educacao SA are associated (or correlated) with American Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Public Education has no effect on the direction of Cogna Educacao i.e., Cogna Educacao and American Public go up and down completely randomly.

Pair Corralation between Cogna Educacao and American Public

Assuming the 90 days horizon Cogna Educacao SA is expected to under-perform the American Public. In addition to that, Cogna Educacao is 1.92 times more volatile than American Public Education. It trades about 0.0 of its total potential returns per unit of risk. American Public Education is currently generating about 0.16 per unit of volatility. If you would invest  1,556  in American Public Education on September 1, 2024 and sell it today you would earn a total of  506.00  from holding American Public Education or generate 32.52% return on investment over 90 days.

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

Cogna Educacao SA  vs.  American Public Education

Cogna Educacao SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cogna Educacao SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Cogna Educacao is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Public Education

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Public Education are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical and fundamental indicators, American Public demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cogna Educacao and American Public

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

The idea behind Cogna Educacao SA and American Public 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.