Correlation Between IDP EDUCATION and Beijing Media

Can any of the company-specific risk be diversified away by investing in both IDP EDUCATION and Beijing Media 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 IDP EDUCATION and Beijing Media into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between IDP EDUCATION LTD and Beijing Media, you can compare the effects of market volatilities on IDP EDUCATION and Beijing Media 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 IDP EDUCATION with a short position of Beijing Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of IDP EDUCATION and Beijing Media.

Diversification Opportunities for IDP EDUCATION and Beijing Media

0.4

Correlation Coefficient

IDP EDUCATION  Beijing Media

Very weak diversification

The 3 months correlation between IDP and Beijing is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding IDP EDUCATION LTD and Beijing Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Media and IDP 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 IDP EDUCATION LTD are associated (or correlated) with Beijing Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Media has no effect on the direction of IDP EDUCATION i.e., IDP EDUCATION and Beijing Media go up and down completely randomly.

Pair Corralation between IDP EDUCATION and Beijing Media

Assuming the 90 days horizon IDP EDUCATION LTD is expected to under-perform the Beijing Media. In addition to that, IDP EDUCATION is 1.39 times more volatile than Beijing Media. It trades about -0.07 of its total potential returns per unit of risk. Beijing Media is currently generating about -0.03 per unit of volatility. If you would invest  3.60  in Beijing Media on December 28, 2024 and sell it today you would lose (0.35) from holding Beijing Media or give up 9.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

IDP EDUCATION LTD  vs.  Beijing Media

IDP EDUCATION LTD

Risk-Adjusted Performance

Very Weak

Over the last 90 days IDP EDUCATION LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Beijing Media

Risk-Adjusted Performance

Very Weak

Over the last 90 days Beijing Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Beijing Media is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IDP EDUCATION and Beijing Media

The main advantage of trading using opposite IDP EDUCATION and Beijing Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDP EDUCATION position performs unexpectedly, Beijing Media 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 Beijing Media will offset losses from the drop in Beijing Media's long position.

The idea behind IDP EDUCATION LTD and Beijing Media 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.