Correlation Between Novelis and Lincoln Educational

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

By analyzing existing cross correlation between Novelis Corp 475 and Lincoln Educational Services, you can compare the effects of market volatilities on Novelis and Lincoln Educational 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 Novelis with a short position of Lincoln Educational. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novelis and Lincoln Educational.

Diversification Opportunities for Novelis and Lincoln Educational

-0.55

Correlation Coefficient

Novelis  Lincoln Educational

Excellent diversification

The 3 months correlation between Novelis and Lincoln is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Novelis Corp 475 and Lincoln Educational Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lincoln Educational and Novelis 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 Novelis Corp 475 are associated (or correlated) with Lincoln Educational. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lincoln Educational has no effect on the direction of Novelis i.e., Novelis and Lincoln Educational go up and down completely randomly.

Pair Corralation between Novelis and Lincoln Educational

Assuming the 90 days trading horizon Novelis Corp 475 is expected to under-perform the Lincoln Educational. But the bond apears to be less risky and, when comparing its historical volatility, Novelis Corp 475 is 4.14 times less risky than Lincoln Educational. The bond trades about -0.22 of its potential returns per unit of risk. The Lincoln Educational Services is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,259  in Lincoln Educational Services on September 17, 2024 and sell it today you would earn a total of  342.00  from holding Lincoln Educational Services or generate 27.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.92%
Values	Daily Returns

Novelis Corp 475  vs.  Lincoln Educational Services

Novelis Corp 475

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Novelis Corp 475 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for Novelis Corp 475 investors.

Lincoln Educational

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lincoln Educational Services are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Lincoln Educational exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Novelis and Lincoln Educational

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

The idea behind Novelis Corp 475 and Lincoln Educational Services 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.