Correlation Between China Liberal and Vasta Platform

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

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

Diversification Opportunities for China Liberal and Vasta Platform

-0.2

Correlation Coefficient

China Liberal  Vasta Platform

Good diversification

The 3 months correlation between China and Vasta is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding China Liberal Education and Vasta Platform in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vasta Platform and China Liberal 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 Liberal Education are associated (or correlated) with Vasta Platform. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vasta Platform has no effect on the direction of China Liberal i.e., China Liberal and Vasta Platform go up and down completely randomly.

Pair Corralation between China Liberal and Vasta Platform

Given the investment horizon of 90 days China Liberal Education is expected to generate 34.94 times more return on investment than Vasta Platform. However, China Liberal is 34.94 times more volatile than Vasta Platform. It trades about 0.11 of its potential returns per unit of risk. Vasta Platform is currently generating about 0.25 per unit of risk. If you would invest  365.00  in China Liberal Education on December 27, 2024 and sell it today you would lose (169.00) from holding China Liberal Education or give up 46.3% of portfolio value over 90 days.

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

China Liberal Education  vs.  Vasta Platform

China Liberal Education

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Liberal Education are ranked lower than 8 (%) 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.

Vasta Platform

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vasta Platform are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Vasta Platform sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Liberal and Vasta Platform

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

The idea behind China Liberal Education and Vasta Platform 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.