Correlation Between Grand Canyon and CPU SOFTWAREHOUSE

Can any of the company-specific risk be diversified away by investing in both Grand Canyon and CPU SOFTWAREHOUSE 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 CPU SOFTWAREHOUSE 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 CPU SOFTWAREHOUSE, you can compare the effects of market volatilities on Grand Canyon and CPU SOFTWAREHOUSE 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 CPU SOFTWAREHOUSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grand Canyon and CPU SOFTWAREHOUSE.

Diversification Opportunities for Grand Canyon and CPU SOFTWAREHOUSE

-0.51

Correlation Coefficient

Grand Canyon  CPU SOFTWAREHOUSE

Excellent diversification

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

Pair Corralation between Grand Canyon and CPU SOFTWAREHOUSE

Assuming the 90 days trading horizon Grand Canyon Education is expected to generate 0.49 times more return on investment than CPU SOFTWAREHOUSE. However, Grand Canyon Education is 2.06 times less risky than CPU SOFTWAREHOUSE. It trades about 0.06 of its potential returns per unit of risk. CPU SOFTWAREHOUSE is currently generating about -0.02 per unit of risk. If you would invest  10,200  in Grand Canyon Education on October 5, 2024 and sell it today you would earn a total of  5,500  from holding Grand Canyon Education or generate 53.92% 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.  CPU SOFTWAREHOUSE

Grand Canyon Education

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Grand Canyon Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, Grand Canyon unveiled solid returns over the last few months and may actually be approaching a breakup point.

CPU SOFTWAREHOUSE

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with Grand Canyon and CPU SOFTWAREHOUSE

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

The idea behind Grand Canyon Education and CPU SOFTWAREHOUSE 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.