Correlation Between STI Education and Figaro Coffee

Can any of the company-specific risk be diversified away by investing in both STI Education and Figaro Coffee 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 STI Education and Figaro Coffee into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between STI Education Systems and Figaro Coffee Group, you can compare the effects of market volatilities on STI Education and Figaro Coffee 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 STI Education with a short position of Figaro Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of STI Education and Figaro Coffee.

Diversification Opportunities for STI Education and Figaro Coffee

0.17

Correlation Coefficient

STI Education  Figaro Coffee

Average diversification

The 3 months correlation between STI and Figaro is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding STI Education Systems and Figaro Coffee Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Figaro Coffee Group and STI 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 STI Education Systems are associated (or correlated) with Figaro Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Figaro Coffee Group has no effect on the direction of STI Education i.e., STI Education and Figaro Coffee go up and down completely randomly.

Pair Corralation between STI Education and Figaro Coffee

Assuming the 90 days trading horizon STI Education Systems is expected to generate 1.15 times more return on investment than Figaro Coffee. However, STI Education is 1.15 times more volatile than Figaro Coffee Group. It trades about 0.27 of its potential returns per unit of risk. Figaro Coffee Group is currently generating about 0.07 per unit of risk. If you would invest  125.00  in STI Education Systems on October 20, 2024 and sell it today you would earn a total of  15.00  from holding STI Education Systems or generate 12.0% return on investment over 90 days.

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

STI Education Systems  vs.  Figaro Coffee Group

STI Education Systems

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in STI Education Systems are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, STI Education exhibited solid returns over the last few months and may actually be approaching a breakup point.

Figaro Coffee Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Figaro Coffee Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Figaro Coffee is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with STI Education and Figaro Coffee

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

The idea behind STI Education Systems and Figaro Coffee Group 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..