Correlation Between Grand Canyon and Lincoln Educational

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

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

Diversification Opportunities for Grand Canyon and Lincoln Educational

0.82

Correlation Coefficient

Grand Canyon  Lincoln Educational

Very poor diversification

The 3 months correlation between Grand and Lincoln is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Grand Canyon Education and Lincoln Educational Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lincoln Educational and Grand Canyon 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 Grand Canyon Education are associated (or correlated) with Lincoln Educational. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lincoln Educational has no effect on the direction of Grand Canyon i.e., Grand Canyon and Lincoln Educational go up and down completely randomly.

Pair Corralation between Grand Canyon and Lincoln Educational

Given the investment horizon of 90 days Grand Canyon is expected to generate 2.0 times less return on investment than Lincoln Educational. But when comparing it to its historical volatility, Grand Canyon Education is 2.63 times less risky than Lincoln Educational. It trades about 0.09 of its potential returns per unit of risk. Lincoln Educational Services is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,648  in Lincoln Educational Services on December 1, 2024 and sell it today you would earn a total of  187.00  from holding Lincoln Educational Services or generate 11.35% return on investment over 90 days.

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

Grand Canyon Education  vs.  Lincoln Educational Services

Grand Canyon Education

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grand Canyon Education are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Grand Canyon may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Lincoln Educational

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lincoln Educational Services are ranked lower than 5 (%) 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.

Pair Trading with Grand Canyon and Lincoln Educational

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

The idea behind Grand Canyon Education and Lincoln Educational Services 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.