Correlation Between Rocket Internet and American Public
Can any of the company-specific risk be diversified away by investing in both Rocket Internet and American Public 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 Rocket Internet and American Public into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rocket Internet SE and American Public Education, you can compare the effects of market volatilities on Rocket Internet and American Public 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 Rocket Internet with a short position of American Public. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rocket Internet and American Public.
Diversification Opportunities for Rocket Internet and American Public
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Rocket and American is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Rocket Internet SE and American Public Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Public Education and Rocket Internet 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 Rocket Internet SE are associated (or correlated) with American Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Public Education has no effect on the direction of Rocket Internet i.e., Rocket Internet and American Public go up and down completely randomly.
Pair Corralation between Rocket Internet and American Public
Assuming the 90 days trading horizon Rocket Internet is expected to generate 8.33 times less return on investment than American Public. But when comparing it to its historical volatility, Rocket Internet SE is 2.06 times less risky than American Public. It trades about 0.06 of its potential returns per unit of risk. American Public Education is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 1,360 in American Public Education on October 26, 2024 and sell it today you would earn a total of 700.00 from holding American Public Education or generate 51.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.33% |
| Values | Daily Returns |
Rocket Internet SE vs. American Public Education
Performance |
| Timeline |
| Rocket Internet SE |
| American Public Education |
Rocket Internet and American Public Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rocket Internet and American Public
The main advantage of trading using opposite Rocket Internet and American Public positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocket Internet position performs unexpectedly, American Public 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 American Public will offset losses from the drop in American Public's long position.| GM vs. Rocket Internet | ||
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The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Rocket Internet as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Rocket Internet's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Rocket Internet's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Rocket Internet SE.
| American Public vs. IDP EDUCATION LTD | American Public vs. TAL Education Group | American Public vs. Grand Canyon Education | American Public vs. Graham Holdings Co |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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