Correlation Between Strategic Education and China Railway
Can any of the company-specific risk be diversified away by investing in both Strategic Education and China Railway 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 Strategic Education and China Railway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Strategic Education and China Railway Signal, you can compare the effects of market volatilities on Strategic Education and China Railway 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 Strategic Education with a short position of China Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Education and China Railway.
Diversification Opportunities for Strategic Education and China Railway
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Strategic and China is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Education and China Railway Signal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Signal and Strategic 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 Strategic Education are associated (or correlated) with China Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Railway Signal has no effect on the direction of Strategic Education i.e., Strategic Education and China Railway go up and down completely randomly.
Pair Corralation between Strategic Education and China Railway
Assuming the 90 days horizon Strategic Education is expected to generate 7.87 times less return on investment than China Railway. But when comparing it to its historical volatility, Strategic Education is 3.77 times less risky than China Railway. It trades about 0.04 of its potential returns per unit of risk. China Railway Signal is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 11.00 in China Railway Signal on September 14, 2024 and sell it today you would earn a total of 27.00 from holding China Railway Signal or generate 245.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.64% |
| Values | Daily Returns |
Strategic Education vs. China Railway Signal
Performance |
| Timeline |
| Strategic Education |
| China Railway Signal |
Strategic Education and China Railway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Strategic Education and China Railway
The main advantage of trading using opposite Strategic Education and China Railway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Education position performs unexpectedly, China Railway 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 Railway will offset losses from the drop in China Railway's long position.| Strategic Education vs. IDP EDUCATION LTD | Strategic Education vs. Laureate Education | Strategic Education vs. Superior Plus Corp | Strategic Education vs. SIVERS SEMICONDUCTORS AB |
| China Railway vs. Strategic Education | China Railway vs. Hyatt Hotels | China Railway vs. INTERCONT HOTELS | China Railway vs. IDP EDUCATION LTD |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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