Correlation Between Adtalem Global and Grand Canyon

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

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

Diversification Opportunities for Adtalem Global and Grand Canyon

0.62

Correlation Coefficient

Adtalem Global  Grand Canyon

Poor diversification

The 3 months correlation between Adtalem and Grand is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Adtalem Global Education and Grand Canyon Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grand Canyon Education and Adtalem Global 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 Adtalem Global Education are associated (or correlated) with Grand Canyon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grand Canyon Education has no effect on the direction of Adtalem Global i.e., Adtalem Global and Grand Canyon go up and down completely randomly.

Pair Corralation between Adtalem Global and Grand Canyon

Given the investment horizon of 90 days Adtalem Global Education is expected to generate 1.65 times more return on investment than Grand Canyon. However, Adtalem Global is 1.65 times more volatile than Grand Canyon Education. It trades about 0.14 of its potential returns per unit of risk. Grand Canyon Education is currently generating about 0.02 per unit of risk. If you would invest  5,052  in Adtalem Global Education on July 30, 2024 and sell it today you would earn a total of  2,157  from holding Adtalem Global Education or generate 42.7% return on investment over 90 days.

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

Adtalem Global Education  vs.  Grand Canyon Education

Adtalem Global Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adtalem Global Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Grand Canyon Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grand Canyon Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in November 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Adtalem Global and Grand Canyon

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

The idea behind Adtalem Global Education and Grand Canyon 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.

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 Transaction History module to view history of all your transactions and understand their impact on performance.