Correlation Between DeVry Education and Continental Aktiengesellscha

Can any of the company-specific risk be diversified away by investing in both DeVry Education and Continental Aktiengesellscha 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 Continental Aktiengesellscha 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 Continental Aktiengesellschaft, you can compare the effects of market volatilities on DeVry Education and Continental Aktiengesellscha 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 Continental Aktiengesellscha. Check out your portfolio center. Please also check ongoing floating volatility patterns of DeVry Education and Continental Aktiengesellscha.

Diversification Opportunities for DeVry Education and Continental Aktiengesellscha

0.76

Correlation Coefficient

DeVry Education  Continental Aktiengesellscha

Poor diversification

The 3 months correlation between DeVry and Continental is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding DeVry Education Group and Continental Aktiengesellschaft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental Aktiengesellscha 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 Continental Aktiengesellscha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Continental Aktiengesellscha has no effect on the direction of DeVry Education i.e., DeVry Education and Continental Aktiengesellscha go up and down completely randomly.

Pair Corralation between DeVry Education and Continental Aktiengesellscha

Assuming the 90 days horizon DeVry Education Group is expected to generate 1.18 times more return on investment than Continental Aktiengesellscha. However, DeVry Education is 1.18 times more volatile than Continental Aktiengesellschaft. It trades about 0.18 of its potential returns per unit of risk. Continental Aktiengesellschaft is currently generating about 0.12 per unit of risk. If you would invest  6,650  in DeVry Education Group on October 5, 2024 and sell it today you would earn a total of  2,000  from holding DeVry Education Group or generate 30.08% return on investment over 90 days.

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

DeVry Education Group  vs.  Continental Aktiengesellschaft

DeVry Education Group

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days DeVry Education Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, DeVry Education reported solid returns over the last few months and may actually be approaching a breakup point.

Continental Aktiengesellscha

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Continental Aktiengesellschaft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively fragile basic indicators, Continental Aktiengesellscha unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DeVry Education and Continental Aktiengesellscha

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

The idea behind DeVry Education Group and Continental Aktiengesellschaft 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.