Correlation Between TAL Education and G8 EDUCATION
Can any of the company-specific risk be diversified away by investing in both TAL Education and G8 EDUCATION 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 G8 EDUCATION 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 G8 EDUCATION, you can compare the effects of market volatilities on TAL Education and G8 EDUCATION 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 G8 EDUCATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of TAL Education and G8 EDUCATION.
Diversification Opportunities for TAL Education and G8 EDUCATION
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between TAL and 3EAG is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding TAL Education Group and G8 EDUCATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G8 EDUCATION 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 G8 EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G8 EDUCATION has no effect on the direction of TAL Education i.e., TAL Education and G8 EDUCATION go up and down completely randomly.
Pair Corralation between TAL Education and G8 EDUCATION
Assuming the 90 days trading horizon TAL Education is expected to generate 5.91 times less return on investment than G8 EDUCATION. In addition to that, TAL Education is 2.28 times more volatile than G8 EDUCATION. It trades about 0.01 of its total potential returns per unit of risk. G8 EDUCATION is currently generating about 0.07 per unit of volatility. If you would invest 64.00 in G8 EDUCATION on September 3, 2024 and sell it today you would earn a total of 18.00 from holding G8 EDUCATION or generate 28.13% 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. G8 EDUCATION
Performance |
| Timeline |
| TAL Education Group |
| G8 EDUCATION |
TAL Education and G8 EDUCATION Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TAL Education and G8 EDUCATION
The main advantage of trading using opposite TAL Education and G8 EDUCATION positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TAL Education position performs unexpectedly, G8 EDUCATION 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 G8 EDUCATION will offset losses from the drop in G8 EDUCATION's long position.| TAL Education vs. Caltagirone SpA | TAL Education vs. Compagnie Plastic Omnium | TAL Education vs. Steel Dynamics | TAL Education vs. Goodyear Tire Rubber |
| G8 EDUCATION vs. Computershare Limited | G8 EDUCATION vs. INTERSHOP Communications Aktiengesellschaft | G8 EDUCATION vs. ATRESMEDIA | G8 EDUCATION vs. SCANSOURCE |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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