Correlation Between STRAYER EDUCATION and Power Integrations

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

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

Diversification Opportunities for STRAYER EDUCATION and Power Integrations

0.72

Correlation Coefficient

STRAYER EDUCATION  Power Integrations

Poor diversification

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

Pair Corralation between STRAYER EDUCATION and Power Integrations

Assuming the 90 days trading horizon STRAYER EDUCATION is expected to under-perform the Power Integrations. In addition to that, STRAYER EDUCATION is 1.12 times more volatile than Power Integrations. It trades about -0.08 of its total potential returns per unit of risk. Power Integrations is currently generating about -0.07 per unit of volatility. If you would invest  5,881  in Power Integrations on December 22, 2024 and sell it today you would lose (631.00) from holding Power Integrations or give up 10.73% of portfolio value over 90 days.

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

STRAYER EDUCATION  vs.  Power Integrations

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.

Power Integrations

Risk-Adjusted Performance

Very Weak

Over the last 90 days Power Integrations has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with STRAYER EDUCATION and Power Integrations

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

The idea behind STRAYER EDUCATION and Power Integrations 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.