Correlation Between Four Seasons and Wah Fu
Can any of the company-specific risk be diversified away by investing in both Four Seasons and Wah Fu 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 Wah Fu 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 Wah Fu Education, you can compare the effects of market volatilities on Four Seasons and Wah Fu 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 Wah Fu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Four Seasons and Wah Fu.
Diversification Opportunities for Four Seasons and Wah Fu
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Four and Wah is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Four Seasons Education and Wah Fu Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wah Fu 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 Wah Fu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wah Fu Education has no effect on the direction of Four Seasons i.e., Four Seasons and Wah Fu go up and down completely randomly.
Pair Corralation between Four Seasons and Wah Fu
Given the investment horizon of 90 days Four Seasons Education is expected to generate 0.73 times more return on investment than Wah Fu. However, Four Seasons Education is 1.38 times less risky than Wah Fu. It trades about -0.24 of its potential returns per unit of risk. Wah Fu Education is currently generating about -0.25 per unit of risk. If you would invest 1,209 in Four Seasons Education on August 27, 2024 and sell it today you would lose (118.00) from holding Four Seasons Education or give up 9.76% 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. Wah Fu Education
Performance |
| Timeline |
| Four Seasons Education |
| Wah Fu Education |
Four Seasons and Wah Fu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Four Seasons and Wah Fu
The main advantage of trading using opposite Four Seasons and Wah Fu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Four Seasons position performs unexpectedly, Wah Fu 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 Wah Fu will offset losses from the drop in Wah Fu's long position.| Four Seasons vs. American Public Education | Four Seasons vs. Lincoln Educational Services | Four Seasons vs. Adtalem Global Education |
| Wah Fu vs. American Public Education | Wah Fu vs. Lincoln Educational Services | Wah Fu vs. Adtalem Global Education |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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