Correlation Between Cogna Educacao and Ambow Education

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

By analyzing existing cross correlation between Cogna Educacao SA and Ambow Education Holding, you can compare the effects of market volatilities on Cogna Educacao and Ambow Education 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 Cogna Educacao with a short position of Ambow Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cogna Educacao and Ambow Education.

Diversification Opportunities for Cogna Educacao and Ambow Education

0.36

Correlation Coefficient

Cogna Educacao  Ambow Education

Weak diversification

The 3 months correlation between Cogna and Ambow is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Cogna Educacao SA and Ambow Education Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambow Education Holding and Cogna Educacao 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 Cogna Educacao SA are associated (or correlated) with Ambow Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambow Education Holding has no effect on the direction of Cogna Educacao i.e., Cogna Educacao and Ambow Education go up and down completely randomly.

Pair Corralation between Cogna Educacao and Ambow Education

Assuming the 90 days horizon Cogna Educacao SA is expected to generate 0.8 times more return on investment than Ambow Education. However, Cogna Educacao SA is 1.26 times less risky than Ambow Education. It trades about 0.13 of its potential returns per unit of risk. Ambow Education Holding is currently generating about 0.03 per unit of risk. If you would invest  19.00  in Cogna Educacao SA on December 28, 2024 and sell it today you would earn a total of  11.00  from holding Cogna Educacao SA or generate 57.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Cogna Educacao SA  vs.  Ambow Education Holding

Cogna Educacao SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cogna Educacao SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Cogna Educacao showed solid returns over the last few months and may actually be approaching a breakup point.

Ambow Education Holding

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ambow Education Holding are ranked lower than 2 (%) 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.

Pair Trading with Cogna Educacao and Ambow Education

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

The idea behind Cogna Educacao SA and Ambow Education Holding 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.