Correlation Between China Liberal and Cogna Educacao

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

By analyzing existing cross correlation between China Liberal Education and Cogna Educacao SA, you can compare the effects of market volatilities on China Liberal and Cogna Educacao 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 China Liberal with a short position of Cogna Educacao. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Liberal and Cogna Educacao.

Diversification Opportunities for China Liberal and Cogna Educacao

0.47

Correlation Coefficient

China Liberal  Cogna Educacao

Very weak diversification

The 3 months correlation between China and Cogna is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding China Liberal Education and Cogna Educacao SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogna Educacao SA and China Liberal 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 China Liberal Education are associated (or correlated) with Cogna Educacao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cogna Educacao SA has no effect on the direction of China Liberal i.e., China Liberal and Cogna Educacao go up and down completely randomly.

Pair Corralation between China Liberal and Cogna Educacao

Given the investment horizon of 90 days China Liberal Education is expected to generate 15.06 times more return on investment than Cogna Educacao. However, China Liberal is 15.06 times more volatile than Cogna Educacao SA. It trades about 0.07 of its potential returns per unit of risk. Cogna Educacao SA is currently generating about -0.06 per unit of risk. If you would invest  275.00  in China Liberal Education on September 25, 2024 and sell it today you would lose (16.00) from holding China Liberal Education or give up 5.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.21%
Values	Daily Returns

China Liberal Education  vs.  Cogna Educacao SA

China Liberal Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Liberal Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Cogna Educacao SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cogna Educacao SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly 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.

Pair Trading with China Liberal and Cogna Educacao

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

The idea behind China Liberal Education and Cogna Educacao SA 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.