Correlation Between Laureate Education and TRAVEL +

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

By analyzing existing cross correlation between Laureate Education and TRAVEL LEISURE DL 01, you can compare the effects of market volatilities on Laureate Education and TRAVEL + 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 TRAVEL +. Check out your portfolio center. Please also check ongoing floating volatility patterns of Laureate Education and TRAVEL +.

Diversification Opportunities for Laureate Education and TRAVEL +

0.95

Correlation Coefficient

Laureate Education  TRAVEL +

Almost no diversification

The 3 months correlation between Laureate and TRAVEL is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Laureate Education and TRAVEL LEISURE DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRAVEL LEISURE DL 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 TRAVEL +. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRAVEL LEISURE DL has no effect on the direction of Laureate Education i.e., Laureate Education and TRAVEL + go up and down completely randomly.

Pair Corralation between Laureate Education and TRAVEL +

Assuming the 90 days trading horizon Laureate Education is expected to generate 1.12 times more return on investment than TRAVEL +. However, Laureate Education is 1.12 times more volatile than TRAVEL LEISURE DL 01. It trades about -0.12 of its potential returns per unit of risk. TRAVEL LEISURE DL 01 is currently generating about -0.38 per unit of risk. If you would invest  1,780  in Laureate Education on October 4, 2024 and sell it today you would lose (50.00) from holding Laureate Education or give up 2.81% of portfolio value over 90 days.

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

Laureate Education  vs.  TRAVEL LEISURE DL 01

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.

TRAVEL LEISURE DL

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TRAVEL LEISURE DL 01 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TRAVEL + reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Laureate Education and TRAVEL +

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

The idea behind Laureate Education and TRAVEL LEISURE DL 01 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.