Correlation Between American Public and Tarena International

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

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

Diversification Opportunities for American Public and Tarena International

-0.52

Correlation Coefficient

American Public  Tarena International

Excellent diversification

The 3 months correlation between American and Tarena is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding American Public Education and Tarena International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tarena International and American Public 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 American Public Education are associated (or correlated) with Tarena International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tarena International has no effect on the direction of American Public i.e., American Public and Tarena International go up and down completely randomly.

Pair Corralation between American Public and Tarena International

Given the investment horizon of 90 days American Public Education is expected to generate 0.55 times more return on investment than Tarena International. However, American Public Education is 1.83 times less risky than Tarena International. It trades about 0.05 of its potential returns per unit of risk. Tarena International is currently generating about -0.01 per unit of risk. If you would invest  1,767  in American Public Education on September 1, 2024 and sell it today you would earn a total of  295.00  from holding American Public Education or generate 16.69% return on investment over 90 days.

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

American Public Education  vs.  Tarena International

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.

Tarena International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tarena International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with American Public and Tarena International

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

The idea behind American Public Education and Tarena International 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.