Correlation Between Ambow Education and China Liberal

Can any of the company-specific risk be diversified away by investing in both Ambow Education and China Liberal 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 China Liberal 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 China Liberal Education, you can compare the effects of market volatilities on Ambow Education and China Liberal 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 China Liberal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ambow Education and China Liberal.

Diversification Opportunities for Ambow Education and China Liberal

0.23

Correlation Coefficient

Ambow Education  China Liberal

Modest diversification

The 3 months correlation between Ambow and China is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ambow Education Holding and China Liberal Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Liberal 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 China Liberal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Liberal Education has no effect on the direction of Ambow Education i.e., Ambow Education and China Liberal go up and down completely randomly.

Pair Corralation between Ambow Education and China Liberal

Given the investment horizon of 90 days Ambow Education is expected to generate 7.41 times less return on investment than China Liberal. But when comparing it to its historical volatility, Ambow Education Holding is 5.43 times less risky than China Liberal. It trades about 0.09 of its potential returns per unit of risk. China Liberal Education is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  27.00  in China Liberal Education on December 5, 2024 and sell it today you would earn a total of  253.00  from holding China Liberal Education or generate 937.04% return on investment over 90 days.

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

Ambow Education Holding  vs.  China Liberal Education

Ambow Education Holding

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ambow Education Holding are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental drivers, Ambow Education displayed solid returns over the last few months and may actually be approaching a breakup point.

China Liberal Education

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Liberal Education are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, China Liberal unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ambow Education and China Liberal

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

The idea behind Ambow Education Holding and China Liberal 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.