Correlation Between Four Seasons and China Liberal

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

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

Diversification Opportunities for Four Seasons and China Liberal

0.09

Correlation Coefficient

Four Seasons  China Liberal

Significant diversification

The 3 months correlation between Four and China is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Four Seasons Education and China Liberal Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Liberal Education and Four Seasons 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 Four Seasons Education are associated (or correlated) with China Liberal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Liberal Education has no effect on the direction of Four Seasons i.e., Four Seasons and China Liberal go up and down completely randomly.

Pair Corralation between Four Seasons and China Liberal

Given the investment horizon of 90 days Four Seasons Education is expected to under-perform the China Liberal. But the stock apears to be less risky and, when comparing its historical volatility, Four Seasons Education is 24.6 times less risky than China Liberal. The stock trades about 0.0 of its potential returns per unit of risk. The China Liberal Education is currently generating about 0.11 of returns per unit of risk over similar time horizon. 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 Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Four Seasons Education  vs.  China Liberal Education

Four Seasons Education

Risk-Adjusted Performance

Very Weak

Over the last 90 days Four Seasons Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Four Seasons is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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.

Pair Trading with Four Seasons and China Liberal

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

The idea behind Four Seasons Education and China Liberal Education 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.