Correlation Between STRAYER EDUCATION and Avanos Medical

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

By analyzing existing cross correlation between STRAYER EDUCATION and Avanos Medical, you can compare the effects of market volatilities on STRAYER EDUCATION and Avanos Medical 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 Avanos Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of STRAYER EDUCATION and Avanos Medical.

Diversification Opportunities for STRAYER EDUCATION and Avanos Medical

0.86

Correlation Coefficient

STRAYER EDUCATION  Avanos Medical

Very poor diversification

The 3 months correlation between STRAYER and Avanos is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding STRAYER EDUCATION and Avanos Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avanos Medical 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 Avanos Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avanos Medical has no effect on the direction of STRAYER EDUCATION i.e., STRAYER EDUCATION and Avanos Medical go up and down completely randomly.

Pair Corralation between STRAYER EDUCATION and Avanos Medical

Assuming the 90 days trading horizon STRAYER EDUCATION is expected to generate 1.38 times more return on investment than Avanos Medical. However, STRAYER EDUCATION is 1.38 times more volatile than Avanos Medical. It trades about -0.05 of its potential returns per unit of risk. Avanos Medical is currently generating about -0.1 per unit of risk. If you would invest  8,737  in STRAYER EDUCATION on December 30, 2024 and sell it today you would lose (837.00) from holding STRAYER EDUCATION or give up 9.58% of portfolio value over 90 days.

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

STRAYER EDUCATION  vs.  Avanos Medical

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.

Avanos Medical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avanos Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with STRAYER EDUCATION and Avanos Medical

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

The idea behind STRAYER EDUCATION and Avanos Medical 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.