Correlation Between CHEMICAL INDUSTRIES and STRAYER EDUCATION

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

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

Diversification Opportunities for CHEMICAL INDUSTRIES and STRAYER EDUCATION

0.0

Correlation Coefficient

CHEMICAL INDUSTRIES  STRAYER EDUCATION

Pay attention - limited upside

The 3 months correlation between CHEMICAL and STRAYER is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding CHEMICAL INDUSTRIES and STRAYER EDUCATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRAYER EDUCATION and CHEMICAL INDUSTRIES 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 CHEMICAL INDUSTRIES are associated (or correlated) with STRAYER EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRAYER EDUCATION has no effect on the direction of CHEMICAL INDUSTRIES i.e., CHEMICAL INDUSTRIES and STRAYER EDUCATION go up and down completely randomly.

Pair Corralation between CHEMICAL INDUSTRIES and STRAYER EDUCATION

Assuming the 90 days trading horizon CHEMICAL INDUSTRIES is expected to generate 4.59 times less return on investment than STRAYER EDUCATION. But when comparing it to its historical volatility, CHEMICAL INDUSTRIES is 8.36 times less risky than STRAYER EDUCATION. It trades about 0.06 of its potential returns per unit of risk. STRAYER EDUCATION is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  6,987  in STRAYER EDUCATION on September 24, 2024 and sell it today you would earn a total of  1,863  from holding STRAYER EDUCATION or generate 26.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.61%
Values	Daily Returns

CHEMICAL INDUSTRIES  vs.  STRAYER EDUCATION

CHEMICAL INDUSTRIES

Risk-Adjusted Performance

0 of 100

Very Weak

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

STRAYER EDUCATION

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in STRAYER EDUCATION are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, STRAYER EDUCATION may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CHEMICAL INDUSTRIES and STRAYER EDUCATION

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

The idea behind CHEMICAL INDUSTRIES and STRAYER EDUCATION 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.