Correlation Between Lincoln Educational and CTS

Can any of the company-specific risk be diversified away by investing in both Lincoln Educational and CTS 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 CTS 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 CTS Corporation, you can compare the effects of market volatilities on Lincoln Educational and CTS 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 CTS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lincoln Educational and CTS.

Diversification Opportunities for Lincoln Educational and CTS

0.93

Correlation Coefficient

Lincoln Educational  CTS

Almost no diversification

The 3 months correlation between Lincoln and CTS is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Educational Services and CTS Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTS Corporation 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 CTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTS Corporation has no effect on the direction of Lincoln Educational i.e., Lincoln Educational and CTS go up and down completely randomly.

Pair Corralation between Lincoln Educational and CTS

Given the investment horizon of 90 days Lincoln Educational Services is expected to generate 1.31 times more return on investment than CTS. However, Lincoln Educational is 1.31 times more volatile than CTS Corporation. It trades about 0.09 of its potential returns per unit of risk. CTS Corporation is currently generating about 0.04 per unit of risk. If you would invest  581.00  in Lincoln Educational Services on September 19, 2024 and sell it today you would earn a total of  933.00  from holding Lincoln Educational Services or generate 160.59% return on investment over 90 days.

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

Lincoln Educational Services  vs.  CTS Corp.

Lincoln Educational

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lincoln Educational Services are ranked lower than 13 (%) 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.

CTS Corporation

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CTS Corporation are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, CTS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Lincoln Educational and CTS

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

The idea behind Lincoln Educational Services and CTS Corporation 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.