Correlation Between TAL Education and CHINA EAST
Can any of the company-specific risk be diversified away by investing in both TAL Education and CHINA EAST 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 TAL Education and CHINA EAST into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TAL Education Group and CHINA EAST ED, you can compare the effects of market volatilities on TAL Education and CHINA EAST 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 TAL Education with a short position of CHINA EAST. Check out your portfolio center. Please also check ongoing floating volatility patterns of TAL Education and CHINA EAST.
Diversification Opportunities for TAL Education and CHINA EAST
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between TAL and CHINA is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding TAL Education Group and CHINA EAST ED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA EAST ED and TAL 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 TAL Education Group are associated (or correlated) with CHINA EAST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA EAST ED has no effect on the direction of TAL Education i.e., TAL Education and CHINA EAST go up and down completely randomly.
Pair Corralation between TAL Education and CHINA EAST
Assuming the 90 days horizon TAL Education Group is expected to under-perform the CHINA EAST. But the stock apears to be less risky and, when comparing its historical volatility, TAL Education Group is 1.07 times less risky than CHINA EAST. The stock trades about -0.02 of its potential returns per unit of risk. The CHINA EAST ED is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 32.00 in CHINA EAST ED on September 25, 2024 and sell it today you would earn a total of 0.00 from holding CHINA EAST ED or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
TAL Education Group vs. CHINA EAST ED
Performance |
| Timeline |
| TAL Education Group |
| CHINA EAST ED |
TAL Education and CHINA EAST Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TAL Education and CHINA EAST
The main advantage of trading using opposite TAL Education and CHINA EAST positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TAL Education position performs unexpectedly, CHINA EAST 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 EAST will offset losses from the drop in CHINA EAST's long position.| TAL Education vs. IDP EDUCATION LTD | TAL Education vs. Grand Canyon Education | TAL Education vs. Graham Holdings Co | TAL Education vs. Strategic Education |
| CHINA EAST vs. IDP EDUCATION LTD | CHINA EAST vs. TAL Education Group | CHINA EAST vs. Grand Canyon Education | CHINA EAST vs. Graham Holdings Co |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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