Correlation Between Grand Canyon and Universal Technical

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

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

Diversification Opportunities for Grand Canyon and Universal Technical

0.81

Correlation Coefficient

Grand Canyon  Universal Technical

Very poor diversification

The 3 months correlation between Grand and Universal is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Grand Canyon Education and Universal Technical Institute in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Technical and Grand Canyon 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 Grand Canyon Education are associated (or correlated) with Universal Technical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Technical has no effect on the direction of Grand Canyon i.e., Grand Canyon and Universal Technical go up and down completely randomly.

Pair Corralation between Grand Canyon and Universal Technical

Given the investment horizon of 90 days Grand Canyon is expected to generate 4.96 times less return on investment than Universal Technical. But when comparing it to its historical volatility, Grand Canyon Education is 1.73 times less risky than Universal Technical. It trades about 0.03 of its potential returns per unit of risk. Universal Technical Institute is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  743.00  in Universal Technical Institute on July 30, 2024 and sell it today you would earn a total of  921.00  from holding Universal Technical Institute or generate 123.96% return on investment over 90 days.

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

Grand Canyon Education  vs.  Universal Technical Institute

Grand Canyon Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grand Canyon Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in November 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Universal Technical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Technical Institute has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in November 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Grand Canyon and Universal Technical

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

The idea behind Grand Canyon Education and Universal Technical Institute 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.