Correlation Between Graham Holdings and Ambow Education

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

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

Diversification Opportunities for Graham Holdings and Ambow Education

0.2

Correlation Coefficient

Graham Holdings  Ambow Education

Modest diversification

The 3 months correlation between Graham and Ambow is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Graham Holdings Co 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 Graham Holdings 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 Graham Holdings Co 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 Graham Holdings i.e., Graham Holdings and Ambow Education go up and down completely randomly.

Pair Corralation between Graham Holdings and Ambow Education

Considering the 90-day investment horizon Graham Holdings is expected to generate 12.03 times less return on investment than Ambow Education. But when comparing it to its historical volatility, Graham Holdings Co is 9.41 times less risky than Ambow Education. It trades about 0.12 of its potential returns per unit of risk. Ambow Education Holding is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  141.00  in Ambow Education Holding on December 20, 2024 and sell it today you would earn a total of  142.00  from holding Ambow Education Holding or generate 100.71% return on investment over 90 days.

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

Graham Holdings Co  vs.  Ambow Education Holding

Graham Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Graham Holdings Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical indicators, Graham Holdings may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Ambow Education Holding

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ambow Education Holding are ranked lower than 11 (%) 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 Graham Holdings and Ambow Education

The main advantage of trading using opposite Graham Holdings and Ambow Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Graham Holdings 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 Graham Holdings Co 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.