Correlation Between Gannett and Lincoln Educational

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

By analyzing existing cross correlation between Gannett Co and Lincoln Educational Services, you can compare the effects of market volatilities on Gannett and Lincoln Educational 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 Gannett with a short position of Lincoln Educational. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gannett and Lincoln Educational.

Diversification Opportunities for Gannett and Lincoln Educational

-0.5

Correlation Coefficient

Gannett  Lincoln Educational

Very good diversification

The 3 months correlation between Gannett and Lincoln is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Gannett Co and Lincoln Educational Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lincoln Educational and Gannett 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 Gannett Co are associated (or correlated) with Lincoln Educational. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lincoln Educational has no effect on the direction of Gannett i.e., Gannett and Lincoln Educational go up and down completely randomly.

Pair Corralation between Gannett and Lincoln Educational

Considering the 90-day investment horizon Gannett Co is expected to under-perform the Lincoln Educational. But the stock apears to be less risky and, when comparing its historical volatility, Gannett Co is 1.47 times less risky than Lincoln Educational. The stock trades about -0.55 of its potential returns per unit of risk. The Lincoln Educational Services is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  1,744  in Lincoln Educational Services on December 10, 2024 and sell it today you would lose (203.00) from holding Lincoln Educational Services or give up 11.64% of portfolio value over 90 days.

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

Gannett Co  vs.  Lincoln Educational Services

Gannett

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gannett Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Lincoln Educational

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lincoln Educational Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Lincoln Educational is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Gannett and Lincoln Educational

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

The idea behind Gannett Co and Lincoln Educational Services 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.