Correlation Between Home Consortium and G8 Education

Can any of the company-specific risk be diversified away by investing in both Home Consortium and G8 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 Home Consortium and G8 Education into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Home Consortium and G8 Education, you can compare the effects of market volatilities on Home Consortium and G8 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 Home Consortium with a short position of G8 Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Consortium and G8 Education.

Diversification Opportunities for Home Consortium and G8 Education

0.16

Correlation Coefficient

Home Consortium  G8 Education

Average diversification

The 3 months correlation between Home and GEM is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Home Consortium and G8 Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G8 Education and Home Consortium 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 Home Consortium are associated (or correlated) with G8 Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G8 Education has no effect on the direction of Home Consortium i.e., Home Consortium and G8 Education go up and down completely randomly.

Pair Corralation between Home Consortium and G8 Education

Assuming the 90 days trading horizon Home Consortium is expected to under-perform the G8 Education. In addition to that, Home Consortium is 1.67 times more volatile than G8 Education. It trades about -0.23 of its total potential returns per unit of risk. G8 Education is currently generating about 0.02 per unit of volatility. If you would invest  130.00  in G8 Education on December 28, 2024 and sell it today you would earn a total of  1.00  from holding G8 Education or generate 0.77% return on investment over 90 days.

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

Home Consortium  vs.  G8 Education

Home Consortium

Risk-Adjusted Performance

Very Weak

Over the last 90 days Home Consortium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

G8 Education

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in G8 Education are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, G8 Education is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Home Consortium and G8 Education

The main advantage of trading using opposite Home Consortium and G8 Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Consortium position performs unexpectedly, G8 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 G8 Education will offset losses from the drop in G8 Education's long position.

The idea behind Home Consortium and G8 Education 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.