Correlation Between EP Financial and Kip McGrath

Can any of the company-specific risk be diversified away by investing in both EP Financial and Kip McGrath 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 EP Financial and Kip McGrath into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for EP Financial and Kip McGrath

0.63

Correlation Coefficient

EP Financial  Kip McGrath

Poor diversification

The 3 months correlation between EP1 and Kip is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding EP Financial Group and Kip McGrath Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kip McGrath Education and EP Financial 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 EP Financial Group are associated (or correlated) with Kip McGrath. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kip McGrath Education has no effect on the direction of EP Financial i.e., EP Financial and Kip McGrath go up and down completely randomly.

Pair Corralation between EP Financial and Kip McGrath

Assuming the 90 days trading horizon EP Financial is expected to generate 1.97 times less return on investment than Kip McGrath. In addition to that, EP Financial is 1.1 times more volatile than Kip McGrath Education. It trades about 0.05 of its total potential returns per unit of risk. Kip McGrath Education is currently generating about 0.12 per unit of volatility. If you would invest  31.00  in Kip McGrath Education on September 29, 2024 and sell it today you would earn a total of  16.00  from holding Kip McGrath Education or generate 51.61% return on investment over 90 days.

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

EP Financial Group  vs.  Kip McGrath Education

EP Financial Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EP Financial Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, EP Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Kip McGrath Education

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kip McGrath Education are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Kip McGrath may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with EP Financial and Kip McGrath

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

The idea behind EP Financial Group and Kip McGrath Education 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.