Correlation Between G8 Education and Mayfield Childcare

Can any of the company-specific risk be diversified away by investing in both G8 Education and Mayfield Childcare 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 G8 Education and Mayfield Childcare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between G8 Education and Mayfield Childcare, you can compare the effects of market volatilities on G8 Education and Mayfield Childcare 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 G8 Education with a short position of Mayfield Childcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of G8 Education and Mayfield Childcare.

Diversification Opportunities for G8 Education and Mayfield Childcare

-0.77

Correlation Coefficient

G8 Education  Mayfield Childcare

Pay attention - limited upside

The 3 months correlation between GEM and Mayfield is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding G8 Education and Mayfield Childcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mayfield Childcare and G8 Education 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 G8 Education are associated (or correlated) with Mayfield Childcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mayfield Childcare has no effect on the direction of G8 Education i.e., G8 Education and Mayfield Childcare go up and down completely randomly.

Pair Corralation between G8 Education and Mayfield Childcare

Assuming the 90 days trading horizon G8 Education is expected to under-perform the Mayfield Childcare. But the stock apears to be less risky and, when comparing its historical volatility, G8 Education is 1.16 times less risky than Mayfield Childcare. The stock trades about -0.09 of its potential returns per unit of risk. The Mayfield Childcare is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  55.00  in Mayfield Childcare on August 26, 2024 and sell it today you would lose (1.00) from holding Mayfield Childcare or give up 1.82% of portfolio value over 90 days.

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

G8 Education  vs.  Mayfield Childcare

G8 Education

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in G8 Education are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, G8 Education is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Mayfield Childcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mayfield Childcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with G8 Education and Mayfield Childcare

The main advantage of trading using opposite G8 Education and Mayfield Childcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G8 Education position performs unexpectedly, Mayfield Childcare 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 Mayfield Childcare will offset losses from the drop in Mayfield Childcare's long position.

The idea behind G8 Education and Mayfield Childcare 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.