Correlation Between Graham Holdings and Strategic Education

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

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

Diversification Opportunities for Graham Holdings and Strategic Education

0.91

Correlation Coefficient

Graham Holdings  Strategic Education

Almost no diversification

The 3 months correlation between Graham and Strategic is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Graham Holdings Co and Strategic Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Education and Graham Holdings 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 Graham Holdings Co are associated (or correlated) with Strategic Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Education has no effect on the direction of Graham Holdings i.e., Graham Holdings and Strategic Education go up and down completely randomly.

Pair Corralation between Graham Holdings and Strategic Education

Assuming the 90 days trading horizon Graham Holdings Co is expected to generate 1.01 times more return on investment than Strategic Education. However, Graham Holdings is 1.01 times more volatile than Strategic Education. It trades about 0.12 of its potential returns per unit of risk. Strategic Education is currently generating about 0.08 per unit of risk. If you would invest  70,827  in Graham Holdings Co on September 22, 2024 and sell it today you would earn a total of  12,673  from holding Graham Holdings Co or generate 17.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.48%
Values	Daily Returns

Graham Holdings Co  vs.  Strategic Education

Graham Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Graham Holdings Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Graham Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Strategic Education

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Education are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Strategic Education may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Graham Holdings and Strategic Education

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

The idea behind Graham Holdings Co and Strategic 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.