Correlation Between Lands End and Educational Development

Can any of the company-specific risk be diversified away by investing in both Lands End and Educational Development 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 Lands End and Educational Development into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Lands End and Educational Development

0.84

Correlation Coefficient

Lands End  Educational Development

Very poor diversification

The 3 months correlation between Lands and Educational is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Lands End and Educational Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Educational Development and Lands End 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 Lands End are associated (or correlated) with Educational Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Educational Development has no effect on the direction of Lands End i.e., Lands End and Educational Development go up and down completely randomly.

Pair Corralation between Lands End and Educational Development

Allowing for the 90-day total investment horizon Lands End is expected to generate 1.15 times more return on investment than Educational Development. However, Lands End is 1.15 times more volatile than Educational Development. It trades about -0.03 of its potential returns per unit of risk. Educational Development is currently generating about -0.12 per unit of risk. If you would invest  1,378  in Lands End on December 10, 2024 and sell it today you would lose (230.00) from holding Lands End or give up 16.69% of portfolio value over 90 days.

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

Lands End  vs.  Educational Development

Lands End

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lands End has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Educational Development

Risk-Adjusted Performance

Very Weak

Over the last 90 days Educational Development has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Lands End and Educational Development

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

The idea behind Lands End and Educational Development 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.