Correlation Between Dave Busters and TAL Education

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

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

Diversification Opportunities for Dave Busters and TAL Education

0.6

Correlation Coefficient

Dave Busters  TAL Education

Poor diversification

The 3 months correlation between Dave and TAL is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Dave Busters Entertainment 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 Dave Busters 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 Dave Busters Entertainment 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 Dave Busters i.e., Dave Busters and TAL Education go up and down completely randomly.

Pair Corralation between Dave Busters and TAL Education

Assuming the 90 days horizon Dave Busters is expected to generate 1.22 times less return on investment than TAL Education. But when comparing it to its historical volatility, Dave Busters Entertainment is 1.19 times less risky than TAL Education. It trades about 0.11 of its potential returns per unit of risk. TAL Education Group is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  715.00  in TAL Education Group on September 3, 2024 and sell it today you would earn a total of  220.00  from holding TAL Education Group or generate 30.77% return on investment over 90 days.

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

Dave Busters Entertainment  vs.  TAL Education Group

Dave Busters Enterta

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dave Busters Entertainment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Dave Busters reported solid returns over the last few months and may actually be approaching a breakup point.

TAL Education Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TAL Education Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, TAL Education unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dave Busters and TAL Education

The main advantage of trading using opposite Dave Busters and TAL Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dave Busters 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 Dave Busters Entertainment 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.