Correlation Between Grand Canyon and GPT

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

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

Diversification Opportunities for Grand Canyon and GPT

-0.51

Correlation Coefficient

Grand Canyon  GPT

Excellent diversification

The 3 months correlation between Grand and GPT is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Grand Canyon Education and GPT Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GPT Group and Grand Canyon 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 Grand Canyon Education are associated (or correlated) with GPT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GPT Group has no effect on the direction of Grand Canyon i.e., Grand Canyon and GPT go up and down completely randomly.

Pair Corralation between Grand Canyon and GPT

Assuming the 90 days trading horizon Grand Canyon Education is expected to generate 0.49 times more return on investment than GPT. However, Grand Canyon Education is 2.05 times less risky than GPT. It trades about 0.06 of its potential returns per unit of risk. GPT Group is currently generating about 0.02 per unit of risk. If you would invest  10,745  in Grand Canyon Education on October 24, 2024 and sell it today you would earn a total of  5,455  from holding Grand Canyon Education or generate 50.77% return on investment over 90 days.

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

Grand Canyon Education  vs.  GPT Group

Grand Canyon Education

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Grand Canyon Education are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Grand Canyon unveiled solid returns over the last few months and may actually be approaching a breakup point.

GPT Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GPT Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, GPT is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Grand Canyon and GPT

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

The idea behind Grand Canyon Education and GPT Group 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.