Correlation Between Safety Insurance and STRAYER EDUCATION

Can any of the company-specific risk be diversified away by investing in both Safety Insurance and STRAYER 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 Safety Insurance and STRAYER EDUCATION into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Safety Insurance Group and STRAYER EDUCATION, you can compare the effects of market volatilities on Safety Insurance and STRAYER 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 Safety Insurance with a short position of STRAYER EDUCATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of Safety Insurance and STRAYER EDUCATION.

Diversification Opportunities for Safety Insurance and STRAYER EDUCATION

0.58

Correlation Coefficient

Safety Insurance  STRAYER EDUCATION

Very weak diversification

The 3 months correlation between Safety and STRAYER is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Safety Insurance Group and STRAYER EDUCATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRAYER EDUCATION and Safety Insurance 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 Safety Insurance Group are associated (or correlated) with STRAYER EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRAYER EDUCATION has no effect on the direction of Safety Insurance i.e., Safety Insurance and STRAYER EDUCATION go up and down completely randomly.

Pair Corralation between Safety Insurance and STRAYER EDUCATION

Assuming the 90 days horizon Safety Insurance Group is expected to generate 0.61 times more return on investment than STRAYER EDUCATION. However, Safety Insurance Group is 1.65 times less risky than STRAYER EDUCATION. It trades about -0.06 of its potential returns per unit of risk. STRAYER EDUCATION is currently generating about -0.05 per unit of risk. If you would invest  7,711  in Safety Insurance Group on December 30, 2024 and sell it today you would lose (511.00) from holding Safety Insurance Group or give up 6.63% of portfolio value over 90 days.

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

Safety Insurance Group  vs.  STRAYER EDUCATION

Safety Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Safety Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Safety Insurance is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

STRAYER EDUCATION

Risk-Adjusted Performance

Very Weak

Over the last 90 days STRAYER EDUCATION has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Safety Insurance and STRAYER EDUCATION

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

The idea behind Safety Insurance Group and STRAYER 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.