Correlation Between Laureate Education and Atea ASA

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

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

Diversification Opportunities for Laureate Education and Atea ASA

-0.22

Correlation Coefficient

Laureate Education  Atea ASA

Very good diversification

The 3 months correlation between Laureate and Atea is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Laureate Education and Atea ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atea ASA and Laureate 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 Laureate Education are associated (or correlated) with Atea ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atea ASA has no effect on the direction of Laureate Education i.e., Laureate Education and Atea ASA go up and down completely randomly.

Pair Corralation between Laureate Education and Atea ASA

Assuming the 90 days trading horizon Laureate Education is expected to generate 1.73 times more return on investment than Atea ASA. However, Laureate Education is 1.73 times more volatile than Atea ASA. It trades about 0.01 of its potential returns per unit of risk. Atea ASA is currently generating about -0.01 per unit of risk. If you would invest  1,750  in Laureate Education on December 21, 2024 and sell it today you would earn a total of  0.00  from holding Laureate Education or generate 0.0% return on investment over 90 days.

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

Laureate Education  vs.  Atea ASA

Laureate Education

Risk-Adjusted Performance

Very Weak

Over the last 90 days Laureate Education has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Laureate Education is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Atea ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Atea ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Atea ASA is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Laureate Education and Atea ASA

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

The idea behind Laureate Education and Atea ASA 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.