Correlation Between Educational Book and Sao Ta

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

By analyzing existing cross correlation between Educational Book In and Sao Ta Foods, you can compare the effects of market volatilities on Educational Book and Sao Ta 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 Educational Book with a short position of Sao Ta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Educational Book and Sao Ta.

Diversification Opportunities for Educational Book and Sao Ta

0.31

Correlation Coefficient

Educational Book  Sao Ta

Weak diversification

The 3 months correlation between Educational and Sao is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Educational Book In and Sao Ta Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sao Ta Foods and Educational Book 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 Educational Book In are associated (or correlated) with Sao Ta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sao Ta Foods has no effect on the direction of Educational Book i.e., Educational Book and Sao Ta go up and down completely randomly.

Pair Corralation between Educational Book and Sao Ta

Assuming the 90 days trading horizon Educational Book In is expected to under-perform the Sao Ta. In addition to that, Educational Book is 3.88 times more volatile than Sao Ta Foods. It trades about -0.01 of its total potential returns per unit of risk. Sao Ta Foods is currently generating about -0.02 per unit of volatility. If you would invest  4,700,000  in Sao Ta Foods on September 21, 2024 and sell it today you would lose (50,000) from holding Sao Ta Foods or give up 1.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	39.06%
Values	Daily Returns

Educational Book In  vs.  Sao Ta Foods

Educational Book

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Educational Book In has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Educational Book is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Sao Ta Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sao Ta Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Sao Ta is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Educational Book and Sao Ta

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

The idea behind Educational Book In and Sao Ta Foods 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.