Correlation Between Global Education and Lorenzini Apparels

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

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

Diversification Opportunities for Global Education and Lorenzini Apparels

0.6

Correlation Coefficient

Global Education  Lorenzini Apparels

Poor diversification

The 3 months correlation between Global and Lorenzini is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Global Education Limited and Lorenzini Apparels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lorenzini Apparels and Global 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 Global Education Limited are associated (or correlated) with Lorenzini Apparels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lorenzini Apparels has no effect on the direction of Global Education i.e., Global Education and Lorenzini Apparels go up and down completely randomly.

Pair Corralation between Global Education and Lorenzini Apparels

Assuming the 90 days trading horizon Global Education Limited is expected to generate 1.05 times more return on investment than Lorenzini Apparels. However, Global Education is 1.05 times more volatile than Lorenzini Apparels Limited. It trades about 0.05 of its potential returns per unit of risk. Lorenzini Apparels Limited is currently generating about 0.02 per unit of risk. If you would invest  5,891  in Global Education Limited on April 25, 2025 and sell it today you would earn a total of  471.00  from holding Global Education Limited or generate 8.0% return on investment over 90 days.

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

Global Education Limited  vs.  Lorenzini Apparels Limited

Global Education

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global Education Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Global Education may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Lorenzini Apparels

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lorenzini Apparels Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Lorenzini Apparels is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Global Education and Lorenzini Apparels

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

The idea behind Global Education Limited and Lorenzini Apparels Limited 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.