Correlation Between Four Seasons and China Liberal
Can any of the company-specific risk be diversified away by investing in both Four Seasons and China Liberal 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 Four Seasons and China Liberal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Four Seasons Education and China Liberal Education, you can compare the effects of market volatilities on Four Seasons and China Liberal 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 Four Seasons with a short position of China Liberal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Four Seasons and China Liberal.
Diversification Opportunities for Four Seasons and China Liberal
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Four and China is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Four Seasons Education and China Liberal Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Liberal Education and Four Seasons 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 Four Seasons Education are associated (or correlated) with China Liberal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Liberal Education has no effect on the direction of Four Seasons i.e., Four Seasons and China Liberal go up and down completely randomly.
Pair Corralation between Four Seasons and China Liberal
Given the investment horizon of 90 days Four Seasons Education is expected to generate 0.7 times more return on investment than China Liberal. However, Four Seasons Education is 1.43 times less risky than China Liberal. It trades about -0.08 of its potential returns per unit of risk. China Liberal Education is currently generating about -0.43 per unit of risk. If you would invest 1,175 in Four Seasons Education on August 24, 2024 and sell it today you would lose (47.00) from holding Four Seasons Education or give up 4.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Four Seasons Education vs. China Liberal Education
Performance |
| Timeline |
| Four Seasons Education |
| China Liberal Education |
Four Seasons and China Liberal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Four Seasons and China Liberal
The main advantage of trading using opposite Four Seasons and China Liberal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Four Seasons position performs unexpectedly, China Liberal 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 China Liberal will offset losses from the drop in China Liberal's long position.| Four Seasons vs. TAL Education Group | Four Seasons vs. Strategic Education | Four Seasons vs. Vasta Platform | Four Seasons vs. Afya |
| China Liberal vs. Lixiang Education Holding | China Liberal vs. Four Seasons Education | China Liberal vs. Jianzhi Education Technology | China Liberal vs. Elite Education Group |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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