Correlation Between STRAYER EDUCATION and Food Life

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

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

Diversification Opportunities for STRAYER EDUCATION and Food Life

0.72

Correlation Coefficient

STRAYER EDUCATION  Food Life

Poor diversification

The 3 months correlation between STRAYER and Food is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding STRAYER EDUCATION and Food Life Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Food Life Companies and STRAYER EDUCATION 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 STRAYER EDUCATION are associated (or correlated) with Food Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Food Life Companies has no effect on the direction of STRAYER EDUCATION i.e., STRAYER EDUCATION and Food Life go up and down completely randomly.

Pair Corralation between STRAYER EDUCATION and Food Life

Assuming the 90 days trading horizon STRAYER EDUCATION is expected to under-perform the Food Life. But the stock apears to be less risky and, when comparing its historical volatility, STRAYER EDUCATION is 3.68 times less risky than Food Life. The stock trades about -0.02 of its potential returns per unit of risk. The Food Life Companies is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  2,060  in Food Life Companies on November 29, 2024 and sell it today you would earn a total of  500.00  from holding Food Life Companies or generate 24.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

STRAYER EDUCATION  vs.  Food Life Companies

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 rather sound technical and fundamental indicators, STRAYER EDUCATION is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Food Life Companies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Food Life Companies are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Food Life reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STRAYER EDUCATION and Food Life

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

The idea behind STRAYER EDUCATION and Food Life Companies 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.