Correlation Between TAL Education and BlueScope Steel
Can any of the company-specific risk be diversified away by investing in both TAL Education and BlueScope Steel 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 BlueScope Steel 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 BlueScope Steel Limited, you can compare the effects of market volatilities on TAL Education and BlueScope Steel 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 BlueScope Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of TAL Education and BlueScope Steel.
Diversification Opportunities for TAL Education and BlueScope Steel
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between TAL and BlueScope is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding TAL Education Group and BlueScope Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlueScope Steel 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 BlueScope Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlueScope Steel has no effect on the direction of TAL Education i.e., TAL Education and BlueScope Steel go up and down completely randomly.
Pair Corralation between TAL Education and BlueScope Steel
Assuming the 90 days trading horizon TAL Education Group is expected to under-perform the BlueScope Steel. In addition to that, TAL Education is 1.25 times more volatile than BlueScope Steel Limited. It trades about -0.1 of its total potential returns per unit of risk. BlueScope Steel Limited is currently generating about 0.05 per unit of volatility. If you would invest 1,280 in BlueScope Steel Limited on August 29, 2024 and sell it today you would earn a total of 30.00 from holding BlueScope Steel Limited or generate 2.34% 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. BlueScope Steel Limited
Performance |
| Timeline |
| TAL Education Group |
| BlueScope Steel |
TAL Education and BlueScope Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TAL Education and BlueScope Steel
The main advantage of trading using opposite TAL Education and BlueScope Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TAL Education position performs unexpectedly, BlueScope Steel 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 BlueScope Steel will offset losses from the drop in BlueScope Steel's long position.| TAL Education vs. Apple Inc | TAL Education vs. Apple Inc | TAL Education vs. Apple Inc | TAL Education vs. Apple Inc |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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