Correlation Between PLAYMATES TOYS and TAL Education

Can any of the company-specific risk be diversified away by investing in both PLAYMATES TOYS and TAL Education 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 PLAYMATES TOYS and TAL Education into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PLAYMATES TOYS and TAL Education Group, you can compare the effects of market volatilities on PLAYMATES TOYS and TAL Education 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 PLAYMATES TOYS with a short position of TAL Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of PLAYMATES TOYS and TAL Education.

Diversification Opportunities for PLAYMATES TOYS and TAL Education

0.05

Correlation Coefficient

PLAYMATES TOYS  TAL Education

Significant diversification

The 3 months correlation between PLAYMATES and TAL is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding PLAYMATES TOYS and TAL Education Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TAL Education Group and PLAYMATES TOYS 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 PLAYMATES TOYS are associated (or correlated) with TAL Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TAL Education Group has no effect on the direction of PLAYMATES TOYS i.e., PLAYMATES TOYS and TAL Education go up and down completely randomly.

Pair Corralation between PLAYMATES TOYS and TAL Education

Assuming the 90 days trading horizon PLAYMATES TOYS is expected to generate 1.77 times more return on investment than TAL Education. However, PLAYMATES TOYS is 1.77 times more volatile than TAL Education Group. It trades about 0.08 of its potential returns per unit of risk. TAL Education Group is currently generating about -0.02 per unit of risk. If you would invest  3.11  in PLAYMATES TOYS on October 7, 2024 and sell it today you would earn a total of  3.89  from holding PLAYMATES TOYS or generate 125.08% return on investment over 90 days.

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

PLAYMATES TOYS  vs.  TAL Education Group

PLAYMATES TOYS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PLAYMATES TOYS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, PLAYMATES TOYS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

TAL Education Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TAL Education Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, TAL Education is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with PLAYMATES TOYS and TAL Education

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

The idea behind PLAYMATES TOYS and TAL Education Group 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.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.