Correlation Between DeVry Education and Air China

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

By analyzing existing cross correlation between DeVry Education Group and Air China Limited, you can compare the effects of market volatilities on DeVry Education and Air China 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 DeVry Education with a short position of Air China. Check out your portfolio center. Please also check ongoing floating volatility patterns of DeVry Education and Air China.

Diversification Opportunities for DeVry Education and Air China

-0.59

Correlation Coefficient

DeVry Education  Air China

Excellent diversification

The 3 months correlation between DeVry and Air is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding DeVry Education Group and Air China Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air China Limited and DeVry 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 DeVry Education Group are associated (or correlated) with Air China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air China Limited has no effect on the direction of DeVry Education i.e., DeVry Education and Air China go up and down completely randomly.

Pair Corralation between DeVry Education and Air China

Assuming the 90 days horizon DeVry Education Group is expected to generate 0.8 times more return on investment than Air China. However, DeVry Education Group is 1.25 times less risky than Air China. It trades about 0.07 of its potential returns per unit of risk. Air China Limited is currently generating about 0.0 per unit of risk. If you would invest  8,650  in DeVry Education Group on December 28, 2024 and sell it today you would earn a total of  800.00  from holding DeVry Education Group or generate 9.25% return on investment over 90 days.

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

DeVry Education Group  vs.  Air China Limited

DeVry Education Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DeVry Education Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, DeVry Education may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Air China Limited

Risk-Adjusted Performance

Very Weak

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

Pair Trading with DeVry Education and Air China

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

The idea behind DeVry Education Group and Air China Limited 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..