Correlation Between Graham Holdings and Tarena International

Can any of the company-specific risk be diversified away by investing in both Graham Holdings 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 Graham Holdings and Tarena International 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 Tarena International, you can compare the effects of market volatilities on Graham Holdings 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 Graham Holdings with a short position of Tarena International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Graham Holdings and Tarena International.

Diversification Opportunities for Graham Holdings and Tarena International

-0.31

Correlation Coefficient

Graham Holdings  Tarena International

Very good diversification

The 3 months correlation between Graham and Tarena is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Graham Holdings Co and Tarena International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tarena International 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 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 Graham Holdings i.e., Graham Holdings and Tarena International go up and down completely randomly.

Pair Corralation between Graham Holdings and Tarena International

Considering the 90-day investment horizon Graham Holdings Co is expected to generate 0.23 times more return on investment than Tarena International. However, Graham Holdings Co is 4.27 times less risky than Tarena International. It trades about 0.07 of its potential returns per unit of risk. Tarena International is currently generating about -0.02 per unit of risk. If you would invest  59,982  in Graham Holdings Co on September 3, 2024 and sell it today you would earn a total of  35,520  from holding Graham Holdings Co or generate 59.22% return on investment over 90 days.

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

Graham Holdings Co  vs.  Tarena International

Graham Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Graham Holdings Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical indicators, Graham Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Tarena International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tarena International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Graham Holdings and Tarena International

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

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.