Correlation Between Elite Education and Ramaco Resources

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

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

Diversification Opportunities for Elite Education and Ramaco Resources

-0.49

Correlation Coefficient

Elite Education  Ramaco Resources

Very good diversification

The 3 months correlation between Elite and Ramaco is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Elite Education Group and Ramaco Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ramaco Resources and Elite 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 Elite Education Group are associated (or correlated) with Ramaco Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ramaco Resources has no effect on the direction of Elite Education i.e., Elite Education and Ramaco Resources go up and down completely randomly.

Pair Corralation between Elite Education and Ramaco Resources

Given the investment horizon of 90 days Elite Education Group is expected to generate 1.09 times more return on investment than Ramaco Resources. However, Elite Education is 1.09 times more volatile than Ramaco Resources. It trades about -0.06 of its potential returns per unit of risk. Ramaco Resources is currently generating about -0.14 per unit of risk. If you would invest  105.00  in Elite Education Group on October 23, 2024 and sell it today you would lose (3.90) from holding Elite Education Group or give up 3.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Elite Education Group  vs.  Ramaco Resources

Elite Education Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elite Education Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent forward indicators, Elite Education reported solid returns over the last few months and may actually be approaching a breakup point.

Ramaco Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ramaco Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Elite Education and Ramaco Resources

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

The idea behind Elite Education Group and Ramaco Resources 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..