Correlation Between GrafTech International and Perdoceo Education

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

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

Diversification Opportunities for GrafTech International and Perdoceo Education

0.47

Correlation Coefficient

GrafTech International  Perdoceo Education

Very weak diversification

The 3 months correlation between GrafTech and Perdoceo is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding GrafTech International and Perdoceo Education Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perdoceo Education Corp and GrafTech International 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 GrafTech International are associated (or correlated) with Perdoceo Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perdoceo Education Corp has no effect on the direction of GrafTech International i.e., GrafTech International and Perdoceo Education go up and down completely randomly.

Pair Corralation between GrafTech International and Perdoceo Education

Considering the 90-day investment horizon GrafTech International is expected to under-perform the Perdoceo Education. In addition to that, GrafTech International is 2.73 times more volatile than Perdoceo Education Corp. It trades about -0.26 of its total potential returns per unit of risk. Perdoceo Education Corp is currently generating about -0.12 per unit of volatility. If you would invest  2,686  in Perdoceo Education Corp on October 10, 2024 and sell it today you would lose (117.00) from holding Perdoceo Education Corp or give up 4.36% of portfolio value over 90 days.

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

GrafTech International  vs.  Perdoceo Education Corp

GrafTech International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GrafTech International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, GrafTech International reported solid returns over the last few months and may actually be approaching a breakup point.

Perdoceo Education Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Perdoceo Education Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, Perdoceo Education displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GrafTech International and Perdoceo Education

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

The idea behind GrafTech International and Perdoceo Education Corp 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.