Correlation Between Ambow Education and American Public

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

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

Diversification Opportunities for Ambow Education and American Public

-0.18

Correlation Coefficient

Ambow Education  American Public

Good diversification

The 3 months correlation between Ambow and American is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Ambow Education Holding and American Public Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Public Education and Ambow 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 Ambow Education Holding are associated (or correlated) with American Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Public Education has no effect on the direction of Ambow Education i.e., Ambow Education and American Public go up and down completely randomly.

Pair Corralation between Ambow Education and American Public

Given the investment horizon of 90 days Ambow Education Holding is expected to generate 2.58 times more return on investment than American Public. However, Ambow Education is 2.58 times more volatile than American Public Education. It trades about 0.03 of its potential returns per unit of risk. American Public Education is currently generating about 0.04 per unit of risk. If you would invest  330.00  in Ambow Education Holding on September 3, 2024 and sell it today you would lose (167.00) from holding Ambow Education Holding or give up 50.61% of portfolio value over 90 days.

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

Ambow Education Holding  vs.  American Public Education

Ambow Education Holding

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ambow Education Holding are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental drivers, Ambow Education displayed solid returns over the last few months and may actually be approaching a breakup point.

American Public Education

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Public Education are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical and fundamental indicators, American Public demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ambow Education and American Public

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

The idea behind Ambow Education Holding and American Public Education 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.