Correlation Between Vasta Platform and IDP Education

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

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

Diversification Opportunities for Vasta Platform and IDP Education

0.75

Correlation Coefficient

Vasta Platform  IDP Education

Poor diversification

The 3 months correlation between Vasta and IDP is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Vasta Platform and IDP Education Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDP Education Limited and Vasta Platform 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 Vasta Platform are associated (or correlated) with IDP Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDP Education Limited has no effect on the direction of Vasta Platform i.e., Vasta Platform and IDP Education go up and down completely randomly.

Pair Corralation between Vasta Platform and IDP Education

Given the investment horizon of 90 days Vasta Platform is expected to under-perform the IDP Education. But the stock apears to be less risky and, when comparing its historical volatility, Vasta Platform is 1.04 times less risky than IDP Education. The stock trades about -0.04 of its potential returns per unit of risk. The IDP Education Limited is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,406  in IDP Education Limited on September 19, 2024 and sell it today you would lose (571.00) from holding IDP Education Limited or give up 40.61% of portfolio value over 90 days.

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

Vasta Platform  vs.  IDP Education Limited

Vasta Platform

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vasta Platform has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

IDP Education Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IDP Education Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Vasta Platform and IDP Education

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

The idea behind Vasta Platform and IDP Education Limited 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.