Correlation Between Strategic Education and Perdoceo Education

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

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

Diversification Opportunities for Strategic Education and Perdoceo Education

0.84

Correlation Coefficient

Strategic Education  Perdoceo Education

Very poor diversification

The 3 months correlation between Strategic and Perdoceo is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Education and Perdoceo Education Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perdoceo Education Corp and Strategic 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 Strategic Education are associated (or correlated) with Perdoceo Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perdoceo Education Corp has no effect on the direction of Strategic Education i.e., Strategic Education and Perdoceo Education go up and down completely randomly.

Pair Corralation between Strategic Education and Perdoceo Education

Given the investment horizon of 90 days Strategic Education is expected to under-perform the Perdoceo Education. In addition to that, Strategic Education is 1.57 times more volatile than Perdoceo Education Corp. It trades about -0.03 of its total potential returns per unit of risk. Perdoceo Education Corp is currently generating about -0.02 per unit of volatility. If you would invest  2,610  in Perdoceo Education Corp on December 30, 2024 and sell it today you would lose (67.00) from holding Perdoceo Education Corp or give up 2.57% of portfolio value over 90 days.

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

Strategic Education  vs.  Perdoceo Education Corp

Strategic Education

Risk-Adjusted Performance

Very Weak

Over the last 90 days Strategic Education has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Strategic Education is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Perdoceo Education Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Perdoceo Education Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Perdoceo Education is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Strategic Education and Perdoceo Education

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

The idea behind Strategic Education and Perdoceo Education Corp 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.