Correlation Between STRAYER EDUCATION and PC Connection

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

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

Diversification Opportunities for STRAYER EDUCATION and PC Connection

0.42

Correlation Coefficient

STRAYER EDUCATION  PC Connection

Very weak diversification

The 3 months correlation between STRAYER and PCC is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding STRAYER EDUCATION and PC Connection in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PC Connection 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 PC Connection. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PC Connection has no effect on the direction of STRAYER EDUCATION i.e., STRAYER EDUCATION and PC Connection go up and down completely randomly.

Pair Corralation between STRAYER EDUCATION and PC Connection

Assuming the 90 days trading horizon STRAYER EDUCATION is expected to generate 1.41 times more return on investment than PC Connection. However, STRAYER EDUCATION is 1.41 times more volatile than PC Connection. It trades about -0.12 of its potential returns per unit of risk. PC Connection is currently generating about -0.18 per unit of risk. If you would invest  9,034  in STRAYER EDUCATION on December 20, 2024 and sell it today you would lose (1,784) from holding STRAYER EDUCATION or give up 19.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

STRAYER EDUCATION  vs.  PC Connection

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 fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

PC Connection

Risk-Adjusted Performance

Very Weak

Over the last 90 days PC Connection has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with STRAYER EDUCATION and PC Connection

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

The idea behind STRAYER EDUCATION and PC Connection 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.