Correlation Between Laureate Education and Strategic Education

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

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

Diversification Opportunities for Laureate Education and Strategic Education

-0.17

Correlation Coefficient

Laureate Education  Strategic Education

Good diversification

The 3 months correlation between Laureate and Strategic is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Laureate Education and Strategic Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Education and Laureate 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 Laureate Education 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 Laureate Education i.e., Laureate Education and Strategic Education go up and down completely randomly.

Pair Corralation between Laureate Education and Strategic Education

Given the investment horizon of 90 days Laureate Education is expected to under-perform the Strategic Education. In addition to that, Laureate Education is 1.1 times more volatile than Strategic Education. It trades about -0.3 of its total potential returns per unit of risk. Strategic Education is currently generating about -0.31 per unit of volatility. If you would invest  9,255  in Strategic Education on July 30, 2024 and sell it today you would lose (670.00) from holding Strategic Education or give up 7.24% of portfolio value over 90 days.

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

Laureate Education  vs.  Strategic Education

Laureate Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Laureate Education has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Laureate Education is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Strategic Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Strategic Education has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in November 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Laureate Education and Strategic Education

The main advantage of trading using opposite Laureate Education and Strategic Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Laureate Education 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 Laureate Education 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.