Correlation Between Lincoln Educational and Arco Platform

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

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

Diversification Opportunities for Lincoln Educational and Arco Platform

0.51

Correlation Coefficient

Lincoln Educational  Arco Platform

Very weak diversification

The 3 months correlation between Lincoln and Arco is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Educational Services and Arco Platform in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arco Platform and Lincoln Educational 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 Lincoln Educational Services are associated (or correlated) with Arco Platform. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arco Platform has no effect on the direction of Lincoln Educational i.e., Lincoln Educational and Arco Platform go up and down completely randomly.

Pair Corralation between Lincoln Educational and Arco Platform

If you would invest  1,252  in Lincoln Educational Services on September 18, 2024 and sell it today you would earn a total of  374.50  from holding Lincoln Educational Services or generate 29.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

Lincoln Educational Services  vs.  Arco Platform

Lincoln Educational

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lincoln Educational Services are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Lincoln Educational exhibited solid returns over the last few months and may actually be approaching a breakup point.

Arco Platform

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arco Platform has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Arco Platform is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Lincoln Educational and Arco Platform

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

The idea behind Lincoln Educational Services and Arco Platform 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.