Correlation Between TAL Education and Electronic Arts
Can any of the company-specific risk be diversified away by investing in both TAL Education and Electronic Arts 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 Electronic Arts 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 Electronic Arts, you can compare the effects of market volatilities on TAL Education and Electronic Arts 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 Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of TAL Education and Electronic Arts.
Diversification Opportunities for TAL Education and Electronic Arts
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between TAL and Electronic is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding TAL Education Group and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts 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 Electronic Arts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronic Arts has no effect on the direction of TAL Education i.e., TAL Education and Electronic Arts go up and down completely randomly.
Pair Corralation between TAL Education and Electronic Arts
Assuming the 90 days trading horizon TAL Education Group is expected to under-perform the Electronic Arts. In addition to that, TAL Education is 2.94 times more volatile than Electronic Arts. It trades about -0.02 of its total potential returns per unit of risk. Electronic Arts is currently generating about 0.53 per unit of volatility. If you would invest 13,462 in Electronic Arts on August 30, 2024 and sell it today you would earn a total of 2,028 from holding Electronic Arts or generate 15.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
TAL Education Group vs. Electronic Arts
Performance |
| Timeline |
| TAL Education Group |
| Electronic Arts |
TAL Education and Electronic Arts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TAL Education and Electronic Arts
The main advantage of trading using opposite TAL Education and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TAL Education position performs unexpectedly, Electronic Arts 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 Electronic Arts will offset losses from the drop in Electronic Arts' long position.| TAL Education vs. Apple Inc | TAL Education vs. Apple Inc | TAL Education vs. Apple Inc | TAL Education vs. Apple Inc |
| Electronic Arts vs. Apple Inc | Electronic Arts vs. Apple Inc | Electronic Arts vs. Superior Plus Corp | Electronic Arts vs. SIVERS SEMICONDUCTORS AB |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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