Correlation Between G8 Education and Microequities Asset

Can any of the company-specific risk be diversified away by investing in both G8 Education and Microequities Asset 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 G8 Education and Microequities Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between G8 Education and Microequities Asset Management, you can compare the effects of market volatilities on G8 Education and Microequities Asset 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 G8 Education with a short position of Microequities Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of G8 Education and Microequities Asset.

Diversification Opportunities for G8 Education and Microequities Asset

0.41

Correlation Coefficient

G8 Education  Microequities Asset

Very weak diversification

The 3 months correlation between GEM and Microequities is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding G8 Education and Microequities Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microequities Asset and G8 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 G8 Education are associated (or correlated) with Microequities Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microequities Asset has no effect on the direction of G8 Education i.e., G8 Education and Microequities Asset go up and down completely randomly.

Pair Corralation between G8 Education and Microequities Asset

Assuming the 90 days trading horizon G8 Education is expected to generate 0.7 times more return on investment than Microequities Asset. However, G8 Education is 1.43 times less risky than Microequities Asset. It trades about 0.07 of its potential returns per unit of risk. Microequities Asset Management is currently generating about 0.04 per unit of risk. If you would invest  127.00  in G8 Education on September 5, 2024 and sell it today you would earn a total of  8.00  from holding G8 Education or generate 6.3% return on investment over 90 days.

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

G8 Education  vs.  Microequities Asset Management

G8 Education

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in G8 Education are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, G8 Education may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Microequities Asset

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microequities Asset Management are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, Microequities Asset is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with G8 Education and Microequities Asset

The main advantage of trading using opposite G8 Education and Microequities Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G8 Education position performs unexpectedly, Microequities Asset 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 Microequities Asset will offset losses from the drop in Microequities Asset's long position.

The idea behind G8 Education and Microequities Asset Management 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.