Correlation Between Global Education and Exxaro Tiles

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

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

Diversification Opportunities for Global Education and Exxaro Tiles

1.0

Correlation Coefficient

Global Education  Exxaro Tiles

No risk reduction

The 3 months correlation between Global and Exxaro is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Global Education Limited and Exxaro Tiles Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxaro Tiles Limited and Global 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 Global Education Limited are associated (or correlated) with Exxaro Tiles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxaro Tiles Limited has no effect on the direction of Global Education i.e., Global Education and Exxaro Tiles go up and down completely randomly.

Pair Corralation between Global Education and Exxaro Tiles

Assuming the 90 days trading horizon Global Education Limited is expected to generate 1.16 times more return on investment than Exxaro Tiles. However, Global Education is 1.16 times more volatile than Exxaro Tiles Limited. It trades about 0.05 of its potential returns per unit of risk. Exxaro Tiles Limited is currently generating about 0.04 per unit of risk. If you would invest  6,691  in Global Education Limited on October 4, 2024 and sell it today you would earn a total of  449.00  from holding Global Education Limited or generate 6.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.18%
Values	Daily Returns

Global Education Limited  vs.  Exxaro Tiles Limited

Global Education

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global Education Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Global Education sustained solid returns over the last few months and may actually be approaching a breakup point.

Exxaro Tiles Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Exxaro Tiles Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Exxaro Tiles sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global Education and Exxaro Tiles

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

The idea behind Global Education Limited and Exxaro Tiles Limited 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.