Correlation Between Equinix and Tarena International

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

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

Diversification Opportunities for Equinix and Tarena International

0.66

Correlation Coefficient

Equinix  Tarena International

Poor diversification

The 3 months correlation between Equinix and Tarena is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Equinix and Tarena International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tarena International and Equinix 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 Equinix 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 Equinix i.e., Equinix and Tarena International go up and down completely randomly.

Pair Corralation between Equinix and Tarena International

Given the investment horizon of 90 days Equinix is expected to under-perform the Tarena International. But the stock apears to be less risky and, when comparing its historical volatility, Equinix is 36.08 times less risky than Tarena International. The stock trades about -0.05 of its potential returns per unit of risk. The Tarena International is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  71.00  in Tarena International on December 2, 2024 and sell it today you would lose (25.00) from holding Tarena International or give up 35.21% of portfolio value over 90 days.

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

Equinix  vs.  Tarena International

Equinix

Risk-Adjusted Performance

Very Weak

Over the last 90 days Equinix has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, Equinix is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Tarena International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tarena International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Tarena International displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Equinix and Tarena International

The main advantage of trading using opposite Equinix and Tarena International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinix 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 Equinix 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.