Correlation Between RETAIL FOOD and Laureate Education

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

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

Diversification Opportunities for RETAIL FOOD and Laureate Education

0.49

Correlation Coefficient

RETAIL FOOD  Laureate Education

Very weak diversification

The 3 months correlation between RETAIL and Laureate is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding RETAIL FOOD GROUP and Laureate Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laureate Education and RETAIL FOOD 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 RETAIL FOOD GROUP are associated (or correlated) with Laureate Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laureate Education has no effect on the direction of RETAIL FOOD i.e., RETAIL FOOD and Laureate Education go up and down completely randomly.

Pair Corralation between RETAIL FOOD and Laureate Education

Assuming the 90 days trading horizon RETAIL FOOD GROUP is expected to under-perform the Laureate Education. In addition to that, RETAIL FOOD is 2.44 times more volatile than Laureate Education. It trades about -0.11 of its total potential returns per unit of risk. Laureate Education is currently generating about 0.03 per unit of volatility. If you would invest  1,740  in Laureate Education on October 10, 2024 and sell it today you would earn a total of  20.00  from holding Laureate Education or generate 1.15% return on investment over 90 days.

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

RETAIL FOOD GROUP  vs.  Laureate Education

RETAIL FOOD GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RETAIL FOOD GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Laureate Education

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Laureate Education are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Laureate Education reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RETAIL FOOD and Laureate Education

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

The idea behind RETAIL FOOD GROUP and Laureate 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.