Correlation Between CHINA EDUCATION and Paychex

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

By analyzing existing cross correlation between CHINA EDUCATION GROUP and Paychex, you can compare the effects of market volatilities on CHINA EDUCATION and Paychex 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 CHINA EDUCATION with a short position of Paychex. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA EDUCATION and Paychex.

Diversification Opportunities for CHINA EDUCATION and Paychex

-0.55

Correlation Coefficient

CHINA EDUCATION  Paychex

Excellent diversification

The 3 months correlation between CHINA and Paychex is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding CHINA EDUCATION GROUP and Paychex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paychex and CHINA 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 CHINA EDUCATION GROUP are associated (or correlated) with Paychex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paychex has no effect on the direction of CHINA EDUCATION i.e., CHINA EDUCATION and Paychex go up and down completely randomly.

Pair Corralation between CHINA EDUCATION and Paychex

Assuming the 90 days horizon CHINA EDUCATION GROUP is expected to generate 3.56 times more return on investment than Paychex. However, CHINA EDUCATION is 3.56 times more volatile than Paychex. It trades about 0.03 of its potential returns per unit of risk. Paychex is currently generating about 0.05 per unit of risk. If you would invest  34.00  in CHINA EDUCATION GROUP on October 27, 2024 and sell it today you would earn a total of  7.00  from holding CHINA EDUCATION GROUP or generate 20.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

CHINA EDUCATION GROUP  vs.  Paychex

CHINA EDUCATION GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHINA EDUCATION GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Paychex

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Paychex are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Paychex may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with CHINA EDUCATION and Paychex

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

The idea behind CHINA EDUCATION GROUP and Paychex 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.