Correlation Between Four Seasons and Eason Technology

Can any of the company-specific risk be diversified away by investing in both Four Seasons and Eason Technology 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 Eason Technology 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 Eason Technology Limited, you can compare the effects of market volatilities on Four Seasons and Eason Technology 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 Eason Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Four Seasons and Eason Technology.

Diversification Opportunities for Four Seasons and Eason Technology

0.13

Correlation Coefficient

Four Seasons  Eason Technology

Average diversification

The 3 months correlation between Four and Eason is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Four Seasons Education and Eason Technology Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eason Technology 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 Eason Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eason Technology has no effect on the direction of Four Seasons i.e., Four Seasons and Eason Technology go up and down completely randomly.

Pair Corralation between Four Seasons and Eason Technology

Given the investment horizon of 90 days Four Seasons is expected to generate 15.7 times less return on investment than Eason Technology. But when comparing it to its historical volatility, Four Seasons Education is 5.89 times less risky than Eason Technology. It trades about 0.01 of its potential returns per unit of risk. Eason Technology Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,900  in Eason Technology Limited on December 28, 2024 and sell it today you would lose (2,194) from holding Eason Technology Limited or give up 75.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	74.58%
Values	Daily Returns

Four Seasons Education  vs.  Eason Technology Limited

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Eason Technology

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eason Technology Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Eason Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Four Seasons and Eason Technology

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

The idea behind Four Seasons Education and Eason Technology Limited 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.