Correlation Between CHINA EDUCATION and THORNEY TECHS

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Can any of the company-specific risk be diversified away by investing in both CHINA EDUCATION and THORNEY TECHS 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 CHINA EDUCATION and THORNEY TECHS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHINA EDUCATION GROUP and THORNEY TECHS LTD, you can compare the effects of market volatilities on CHINA EDUCATION and THORNEY TECHS 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 CHINA EDUCATION with a short position of THORNEY TECHS. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA EDUCATION and THORNEY TECHS.

Diversification Opportunities for CHINA EDUCATION and THORNEY TECHS

0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between CHINA and THORNEY is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding CHINA EDUCATION GROUP and THORNEY TECHS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THORNEY TECHS LTD and CHINA 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 CHINA EDUCATION GROUP are associated (or correlated) with THORNEY TECHS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THORNEY TECHS LTD has no effect on the direction of CHINA EDUCATION i.e., CHINA EDUCATION and THORNEY TECHS go up and down completely randomly.

Pair Corralation between CHINA EDUCATION and THORNEY TECHS

Assuming the 90 days horizon CHINA EDUCATION GROUP is expected to generate 0.66 times more return on investment than THORNEY TECHS. However, CHINA EDUCATION GROUP is 1.52 times less risky than THORNEY TECHS. It trades about 0.06 of its potential returns per unit of risk. THORNEY TECHS LTD is currently generating about -0.03 per unit of risk. If you would invest  41.00  in CHINA EDUCATION GROUP on November 3, 2024 and sell it today you would earn a total of  1.00  from holding CHINA EDUCATION GROUP or generate 2.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

CHINA EDUCATION GROUP  vs.  THORNEY TECHS LTD

 Performance 
       Timeline  
CHINA EDUCATION GROUP 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days CHINA EDUCATION GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
THORNEY TECHS LTD 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days THORNEY TECHS LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, THORNEY TECHS is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

CHINA EDUCATION and THORNEY TECHS Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CHINA EDUCATION and THORNEY TECHS

The main advantage of trading using opposite CHINA EDUCATION and THORNEY TECHS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA EDUCATION position performs unexpectedly, THORNEY TECHS 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 THORNEY TECHS will offset losses from the drop in THORNEY TECHS's long position.
The idea behind CHINA EDUCATION GROUP and THORNEY TECHS LTD 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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