Correlation Between COGNA EDUCACAO and EMBARK EDUCATION

Can any of the company-specific risk be diversified away by investing in both COGNA EDUCACAO and EMBARK 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 COGNA EDUCACAO and EMBARK EDUCATION into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between COGNA EDUCACAO SPADR and EMBARK EDUCATION LTD, you can compare the effects of market volatilities on COGNA EDUCACAO and EMBARK 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 COGNA EDUCACAO with a short position of EMBARK EDUCATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of COGNA EDUCACAO and EMBARK EDUCATION.

Diversification Opportunities for COGNA EDUCACAO and EMBARK EDUCATION

0.01

Correlation Coefficient

COGNA EDUCACAO  EMBARK EDUCATION

Significant diversification

The 3 months correlation between COGNA and EMBARK is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding COGNA EDUCACAO SPADR and EMBARK EDUCATION LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMBARK EDUCATION LTD and COGNA EDUCACAO 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 COGNA EDUCACAO SPADR are associated (or correlated) with EMBARK EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMBARK EDUCATION LTD has no effect on the direction of COGNA EDUCACAO i.e., COGNA EDUCACAO and EMBARK EDUCATION go up and down completely randomly.

Pair Corralation between COGNA EDUCACAO and EMBARK EDUCATION

Assuming the 90 days trading horizon COGNA EDUCACAO SPADR is expected to generate 26.69 times more return on investment than EMBARK EDUCATION. However, COGNA EDUCACAO is 26.69 times more volatile than EMBARK EDUCATION LTD. It trades about 0.04 of its potential returns per unit of risk. EMBARK EDUCATION LTD is currently generating about 0.13 per unit of risk. If you would invest  20.00  in COGNA EDUCACAO SPADR on September 4, 2024 and sell it today you would lose (2.00) from holding COGNA EDUCACAO SPADR or give up 10.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.92%
Values	Daily Returns

COGNA EDUCACAO SPADR  vs.  EMBARK EDUCATION LTD

COGNA EDUCACAO SPADR

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in COGNA EDUCACAO SPADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, COGNA EDUCACAO reported solid returns over the last few months and may actually be approaching a breakup point.

EMBARK EDUCATION LTD

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EMBARK EDUCATION LTD are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, EMBARK EDUCATION is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with COGNA EDUCACAO and EMBARK EDUCATION

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

The idea behind COGNA EDUCACAO SPADR and EMBARK EDUCATION LTD 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.