Correlation Between GT Capital and STI Education

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

By analyzing existing cross correlation between GT Capital Holdings and STI Education Systems, you can compare the effects of market volatilities on GT Capital and STI Education 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 GT Capital with a short position of STI Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of GT Capital and STI Education.

Diversification Opportunities for GT Capital and STI Education

-0.72

Correlation Coefficient

GT Capital  STI Education

Pay attention - limited upside

The 3 months correlation between GTCAP and STI is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding GT Capital Holdings and STI Education Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STI Education Systems and GT Capital 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 GT Capital Holdings are associated (or correlated) with STI Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STI Education Systems has no effect on the direction of GT Capital i.e., GT Capital and STI Education go up and down completely randomly.

Pair Corralation between GT Capital and STI Education

Assuming the 90 days trading horizon GT Capital Holdings is expected to under-perform the STI Education. But the stock apears to be less risky and, when comparing its historical volatility, GT Capital Holdings is 1.13 times less risky than STI Education. The stock trades about -0.18 of its potential returns per unit of risk. The STI Education Systems is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  125.00  in STI Education Systems on October 20, 2024 and sell it today you would earn a total of  15.00  from holding STI Education Systems or generate 12.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	94.44%
Values	Daily Returns

GT Capital Holdings  vs.  STI Education Systems

GT Capital Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GT Capital Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

STI Education Systems

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in STI Education Systems are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, STI Education exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GT Capital and STI Education

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

The idea behind GT Capital Holdings and STI Education Systems 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.