Correlation Between Ambow Education and Skillful Craftsman

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

Diversification Opportunities for Ambow Education and Skillful Craftsman

0.38

Correlation Coefficient

Ambow Education  Skillful Craftsman

Weak diversification

The 3 months correlation between Ambow and Skillful is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Ambow Education Holding and Skillful Craftsman Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skillful Craftsman 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 Skillful Craftsman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skillful Craftsman has no effect on the direction of Ambow Education i.e., Ambow Education and Skillful Craftsman go up and down completely randomly.

Pair Corralation between Ambow Education and Skillful Craftsman

Given the investment horizon of 90 days Ambow Education Holding is expected to generate 6.54 times more return on investment than Skillful Craftsman. However, Ambow Education is 6.54 times more volatile than Skillful Craftsman Education. It trades about 0.15 of its potential returns per unit of risk. Skillful Craftsman Education is currently generating about 0.33 per unit of risk. If you would invest  140.00  in Ambow Education Holding on October 20, 2024 and sell it today you would earn a total of  41.00  from holding Ambow Education Holding or generate 29.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Ambow Education Holding  vs.  Skillful Craftsman Education

Ambow Education Holding

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ambow Education Holding are ranked lower than 4 (%) 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.

Skillful Craftsman

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Skillful Craftsman Education are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Skillful Craftsman disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ambow Education and Skillful Craftsman

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

The idea behind Ambow Education Holding and Skillful Craftsman 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..