Correlation Between TAL Education and Beta Systems

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Can any of the company-specific risk be diversified away by investing in both TAL Education and Beta Systems 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 Beta Systems 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 Beta Systems Software, you can compare the effects of market volatilities on TAL Education and Beta Systems 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 Beta Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of TAL Education and Beta Systems.

Diversification Opportunities for TAL Education and Beta Systems

TALBetaDiversified AwayTALBetaDiversified Away100%
0.16
  Correlation Coefficient

Average diversification

The 3 months correlation between TAL and Beta is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding TAL Education Group and Beta Systems Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beta Systems Software 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 Beta Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beta Systems Software has no effect on the direction of TAL Education i.e., TAL Education and Beta Systems go up and down completely randomly.

Pair Corralation between TAL Education and Beta Systems

Assuming the 90 days trading horizon TAL Education Group is expected to generate 2.52 times more return on investment than Beta Systems. However, TAL Education is 2.52 times more volatile than Beta Systems Software. It trades about 0.11 of its potential returns per unit of risk. Beta Systems Software is currently generating about -0.02 per unit of risk. If you would invest  1,200  in TAL Education Group on November 30, 2024 and sell it today you would earn a total of  80.00  from holding TAL Education Group or generate 6.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

TAL Education Group  vs.  Beta Systems Software

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -1001020304050
JavaScript chart by amCharts 3.21.15IZZ BSS
       Timeline  
TAL Education Group 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in TAL Education Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, TAL Education unveiled solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb91011121314
Beta Systems Software 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Over the last 90 days Beta Systems Software has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Beta Systems is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb2222.52323.52424.52525.5

TAL Education and Beta Systems Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-12.76-9.62-6.48-3.35-0.213.136.499.8513.2116.57 0.010.020.030.040.050.060.07
JavaScript chart by amCharts 3.21.15IZZ BSS
       Returns  

Pair Trading with TAL Education and Beta Systems

The main advantage of trading using opposite TAL Education and Beta Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TAL Education position performs unexpectedly, Beta Systems 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 Beta Systems will offset losses from the drop in Beta Systems' long position.
The idea behind TAL Education Group and Beta Systems Software pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Beta Systems as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Beta Systems' systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Beta Systems' unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Beta Systems Software.
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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