Correlation Between Lincoln Educational and Corporacion America

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

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

Diversification Opportunities for Lincoln Educational and Corporacion America

0.72

Correlation Coefficient

Lincoln Educational  Corporacion America

Poor diversification

The 3 months correlation between Lincoln and Corporacion is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Educational Services and Corporacion America Airports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corporacion America and Lincoln Educational 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 Lincoln Educational Services are associated (or correlated) with Corporacion America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corporacion America has no effect on the direction of Lincoln Educational i.e., Lincoln Educational and Corporacion America go up and down completely randomly.

Pair Corralation between Lincoln Educational and Corporacion America

Given the investment horizon of 90 days Lincoln Educational Services is expected to generate 1.09 times more return on investment than Corporacion America. However, Lincoln Educational is 1.09 times more volatile than Corporacion America Airports. It trades about 0.16 of its potential returns per unit of risk. Corporacion America Airports is currently generating about 0.12 per unit of risk. If you would invest  1,269  in Lincoln Educational Services on September 14, 2024 and sell it today you would earn a total of  333.00  from holding Lincoln Educational Services or generate 26.24% return on investment over 90 days.

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

Lincoln Educational Services  vs.  Corporacion America Airports

Lincoln Educational

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lincoln Educational Services are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Lincoln Educational exhibited solid returns over the last few months and may actually be approaching a breakup point.

Corporacion America

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Corporacion America Airports are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Corporacion America reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lincoln Educational and Corporacion America

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

The idea behind Lincoln Educational Services and Corporacion America Airports 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.