Correlation Between Laureate Education and Graham Holdings

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

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

Diversification Opportunities for Laureate Education and Graham Holdings

0.92

Correlation Coefficient

Laureate Education  Graham Holdings

Almost no diversification

The 3 months correlation between Laureate and Graham is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Laureate Education and Graham Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graham Holdings 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 Graham Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graham Holdings has no effect on the direction of Laureate Education i.e., Laureate Education and Graham Holdings go up and down completely randomly.

Pair Corralation between Laureate Education and Graham Holdings

Given the investment horizon of 90 days Laureate Education is expected to generate 0.95 times more return on investment than Graham Holdings. However, Laureate Education is 1.06 times less risky than Graham Holdings. It trades about 0.18 of its potential returns per unit of risk. Graham Holdings Co is currently generating about 0.15 per unit of risk. If you would invest  1,503  in Laureate Education on September 2, 2024 and sell it today you would earn a total of  397.00  from holding Laureate Education or generate 26.41% return on investment over 90 days.

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

Laureate Education  vs.  Graham Holdings Co

Laureate Education

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Laureate Education are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Laureate Education reported solid returns over the last few months and may actually be approaching a breakup point.

Graham Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Graham Holdings Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical indicators, Graham Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Laureate Education and Graham Holdings

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

The idea behind Laureate Education and Graham Holdings Co 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.