Correlation Between Lincoln Educational and Strategic Education

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

Diversification Opportunities for Lincoln Educational and Strategic Education

0.66

Correlation Coefficient

Lincoln Educational  Strategic Education

Poor diversification

The 3 months correlation between Lincoln and Strategic is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Educational Services and Strategic Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Education 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 Strategic Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Education has no effect on the direction of Lincoln Educational i.e., Lincoln Educational and Strategic Education go up and down completely randomly.

Pair Corralation between Lincoln Educational and Strategic Education

Given the investment horizon of 90 days Lincoln Educational Services is expected to generate 1.46 times more return on investment than Strategic Education. However, Lincoln Educational is 1.46 times more volatile than Strategic Education. It trades about 0.23 of its potential returns per unit of risk. Strategic Education is currently generating about 0.03 per unit of risk. If you would invest  1,178  in Lincoln Educational Services on September 1, 2024 and sell it today you would earn a total of  465.00  from holding Lincoln Educational Services or generate 39.47% 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.  Strategic Education

Lincoln Educational

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lincoln Educational Services are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Lincoln Educational exhibited solid returns over the last few months and may actually be approaching a breakup point.

Strategic Education

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Education are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Strategic Education is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lincoln Educational and Strategic Education

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

The idea behind Lincoln Educational Services and Strategic Education 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.