Correlation Between China Liberal and Grand Canyon

Can any of the company-specific risk be diversified away by investing in both China Liberal 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 China Liberal and Grand Canyon 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 Grand Canyon Education, you can compare the effects of market volatilities on China Liberal 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 China Liberal with a short position of Grand Canyon. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Liberal and Grand Canyon.

Diversification Opportunities for China Liberal and Grand Canyon

-0.54

Correlation Coefficient

China Liberal  Grand Canyon

Excellent diversification

The 3 months correlation between China and Grand is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding China Liberal 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 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 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 China Liberal i.e., China Liberal and Grand Canyon go up and down completely randomly.

Pair Corralation between China Liberal and Grand Canyon

Given the investment horizon of 90 days China Liberal Education is expected to generate 40.61 times more return on investment than Grand Canyon. However, China Liberal is 40.61 times more volatile than Grand Canyon Education. It trades about 0.06 of its potential returns per unit of risk. Grand Canyon Education is currently generating about 0.06 per unit of risk. If you would invest  990.00  in China Liberal Education on January 3, 2025 and sell it today you would lose (797.00) from holding China Liberal Education or give up 80.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

China Liberal Education  vs.  Grand Canyon Education

China Liberal Education

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Liberal Education are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, China Liberal unveiled solid returns over the last few months and may actually be approaching a breakup point.

Grand Canyon Education

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grand Canyon Education are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Grand Canyon may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Pair Trading with China Liberal and Grand Canyon

The main advantage of trading using opposite China Liberal and Grand Canyon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Liberal 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 China Liberal 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.