Correlation Between China BlueChemical and DeVry Education

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

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

Diversification Opportunities for China BlueChemical and DeVry Education

0.52

Correlation Coefficient

China BlueChemical  DeVry Education

Very weak diversification

The 3 months correlation between China and DeVry is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding China BlueChemical and DeVry Education Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DeVry Education Group and China BlueChemical 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 China BlueChemical are associated (or correlated) with DeVry Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DeVry Education Group has no effect on the direction of China BlueChemical i.e., China BlueChemical and DeVry Education go up and down completely randomly.

Pair Corralation between China BlueChemical and DeVry Education

Assuming the 90 days horizon China BlueChemical is expected to generate 1.17 times less return on investment than DeVry Education. In addition to that, China BlueChemical is 1.56 times more volatile than DeVry Education Group. It trades about 0.1 of its total potential returns per unit of risk. DeVry Education Group is currently generating about 0.18 per unit of volatility. If you would invest  6,750  in DeVry Education Group on October 22, 2024 and sell it today you would earn a total of  2,700  from holding DeVry Education Group or generate 40.0% return on investment over 90 days.

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

China BlueChemical  vs.  DeVry Education Group

China BlueChemical

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China BlueChemical are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, China BlueChemical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

DeVry Education Group

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DeVry Education Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, DeVry Education reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China BlueChemical and DeVry Education

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

The idea behind China BlueChemical and DeVry Education 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.