Correlation Between IDP Education and Kip McGrath

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

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

Diversification Opportunities for IDP Education and Kip McGrath

-0.09

Correlation Coefficient

IDP Education  Kip McGrath

Good diversification

The 3 months correlation between IDP and Kip is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding IDP Education and Kip McGrath Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kip McGrath Education and IDP 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 IDP Education are associated (or correlated) with Kip McGrath. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kip McGrath Education has no effect on the direction of IDP Education i.e., IDP Education and Kip McGrath go up and down completely randomly.

Pair Corralation between IDP Education and Kip McGrath

Assuming the 90 days trading horizon IDP Education is expected to under-perform the Kip McGrath. But the stock apears to be less risky and, when comparing its historical volatility, IDP Education is 1.29 times less risky than Kip McGrath. The stock trades about -0.15 of its potential returns per unit of risk. The Kip McGrath Education is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  44.00  in Kip McGrath Education on September 4, 2024 and sell it today you would earn a total of  6.00  from holding Kip McGrath Education or generate 13.64% return on investment over 90 days.

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

IDP Education  vs.  Kip McGrath Education

IDP Education

Risk-Adjusted Performance

0 of 100

Very Weak

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

Kip McGrath Education

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kip McGrath Education are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Kip McGrath unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IDP Education and Kip McGrath

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

The idea behind IDP Education and Kip McGrath 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.

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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.