Correlation Between Lancashire Holdings and Perdoceo Education

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

By analyzing existing cross correlation between Lancashire Holdings Limited and Perdoceo Education, you can compare the effects of market volatilities on Lancashire Holdings and Perdoceo 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 Lancashire Holdings with a short position of Perdoceo Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lancashire Holdings and Perdoceo Education.

Diversification Opportunities for Lancashire Holdings and Perdoceo Education

0.68

Correlation Coefficient

Lancashire Holdings  Perdoceo Education

Poor diversification

The 3 months correlation between Lancashire and Perdoceo is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Lancashire Holdings Limited and Perdoceo Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perdoceo Education and Lancashire Holdings 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 Lancashire Holdings Limited are associated (or correlated) with Perdoceo Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perdoceo Education has no effect on the direction of Lancashire Holdings i.e., Lancashire Holdings and Perdoceo Education go up and down completely randomly.

Pair Corralation between Lancashire Holdings and Perdoceo Education

Assuming the 90 days horizon Lancashire Holdings Limited is expected to under-perform the Perdoceo Education. But the stock apears to be less risky and, when comparing its historical volatility, Lancashire Holdings Limited is 1.14 times less risky than Perdoceo Education. The stock trades about -0.11 of its potential returns per unit of risk. The Perdoceo Education is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,520  in Perdoceo Education on October 9, 2024 and sell it today you would earn a total of  0.00  from holding Perdoceo Education or generate 0.0% return on investment over 90 days.

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

Lancashire Holdings Limited  vs.  Perdoceo Education

Lancashire Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lancashire Holdings Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Lancashire Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Perdoceo Education

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with Lancashire Holdings and Perdoceo Education

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

The idea behind Lancashire Holdings Limited and Perdoceo 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.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.