Correlation Between 2U and Elite Education

Can any of the company-specific risk be diversified away by investing in both 2U and Elite 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 2U and Elite Education into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 2U Inc and Elite Education Group, you can compare the effects of market volatilities on 2U and Elite 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 2U with a short position of Elite Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of 2U and Elite Education.

Diversification Opportunities for 2U and Elite Education

-0.32

Correlation Coefficient

2U  Elite Education

Very good diversification

The 3 months correlation between 2U and Elite is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding 2U Inc and Elite Education Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elite Education Group and 2U 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 2U Inc are associated (or correlated) with Elite Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elite Education Group has no effect on the direction of 2U i.e., 2U and Elite Education go up and down completely randomly.

Pair Corralation between 2U and Elite Education

If you would invest  77.00  in Elite Education Group on August 30, 2024 and sell it today you would earn a total of  26.00  from holding Elite Education Group or generate 33.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

2U Inc  vs.  Elite Education Group

2U Inc

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days 2U Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively weak basic indicators, 2U unveiled solid returns over the last few months and may actually be approaching a breakup point.

Elite Education Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elite Education Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward indicators, Elite Education reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 2U and Elite Education

The main advantage of trading using opposite 2U and Elite Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 2U position performs unexpectedly, Elite 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 Elite Education will offset losses from the drop in Elite Education's long position.

The idea behind 2U Inc and Elite 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.

Check out your portfolio center.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.