Correlation Between Caseys General and EMBARK EDUCATION

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

By analyzing existing cross correlation between Caseys General Stores and EMBARK EDUCATION LTD, you can compare the effects of market volatilities on Caseys General and EMBARK 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 Caseys General with a short position of EMBARK EDUCATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caseys General and EMBARK EDUCATION.

Diversification Opportunities for Caseys General and EMBARK EDUCATION

0.78

Correlation Coefficient

Caseys General  EMBARK EDUCATION

Poor diversification

The 3 months correlation between Caseys and EMBARK is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Caseys General Stores and EMBARK EDUCATION LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMBARK EDUCATION LTD and Caseys General 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 Caseys General Stores are associated (or correlated) with EMBARK EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMBARK EDUCATION LTD has no effect on the direction of Caseys General i.e., Caseys General and EMBARK EDUCATION go up and down completely randomly.

Pair Corralation between Caseys General and EMBARK EDUCATION

Assuming the 90 days trading horizon Caseys General Stores is expected to generate 3.4 times more return on investment than EMBARK EDUCATION. However, Caseys General is 3.4 times more volatile than EMBARK EDUCATION LTD. It trades about 0.06 of its potential returns per unit of risk. EMBARK EDUCATION LTD is currently generating about 0.15 per unit of risk. If you would invest  36,949  in Caseys General Stores on September 27, 2024 and sell it today you would earn a total of  1,451  from holding Caseys General Stores or generate 3.93% return on investment over 90 days.

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

Caseys General Stores  vs.  EMBARK EDUCATION LTD

Caseys General Stores

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Caseys General Stores are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Caseys General unveiled solid returns over the last few months and may actually be approaching a breakup point.

EMBARK EDUCATION LTD

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EMBARK EDUCATION LTD are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, EMBARK EDUCATION is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Caseys General and EMBARK EDUCATION

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

The idea behind Caseys General Stores and EMBARK EDUCATION LTD 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.

Check out your portfolio center.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.