Correlation Between Seven West and Embark Education

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

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

Diversification Opportunities for Seven West and Embark Education

-0.43

Correlation Coefficient

Seven West  Embark Education

Very good diversification

The 3 months correlation between Seven and Embark is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Seven West Media and Embark Education Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embark Education and Seven West 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 Seven West Media are associated (or correlated) with Embark Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embark Education has no effect on the direction of Seven West i.e., Seven West and Embark Education go up and down completely randomly.

Pair Corralation between Seven West and Embark Education

Assuming the 90 days trading horizon Seven West Media is expected to under-perform the Embark Education. In addition to that, Seven West is 1.86 times more volatile than Embark Education Group. It trades about -0.07 of its total potential returns per unit of risk. Embark Education Group is currently generating about 0.09 per unit of volatility. If you would invest  73.00  in Embark Education Group on September 3, 2024 and sell it today you would earn a total of  7.00  from holding Embark Education Group or generate 9.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Seven West Media  vs.  Embark Education Group

Seven West Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seven West Media has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Embark Education

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Embark Education Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Embark Education may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Seven West and Embark Education

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

The idea behind Seven West Media and Embark Education 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.