Correlation Between Genius and Four Seasons

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

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

Diversification Opportunities for Genius and Four Seasons

0.26

Correlation Coefficient

Genius  Four Seasons

Modest diversification

The 3 months correlation between Genius and Four is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Genius Group and Four Seasons Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Four Seasons Education and Genius 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 Genius Group are associated (or correlated) with Four Seasons. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Four Seasons Education has no effect on the direction of Genius i.e., Genius and Four Seasons go up and down completely randomly.

Pair Corralation between Genius and Four Seasons

Considering the 90-day investment horizon Genius Group is expected to generate 2.95 times more return on investment than Four Seasons. However, Genius is 2.95 times more volatile than Four Seasons Education. It trades about 0.03 of its potential returns per unit of risk. Four Seasons Education is currently generating about -0.02 per unit of risk. If you would invest  86.00  in Genius Group on September 2, 2024 and sell it today you would lose (12.00) from holding Genius Group or give up 13.95% of portfolio value over 90 days.

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

Genius Group  vs.  Four Seasons Education

Genius Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Genius Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Genius unveiled solid returns over the last few months and may actually be approaching a breakup point.

Four Seasons Education

Risk-Adjusted Performance

0 of 100

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

Pair Trading with Genius and Four Seasons

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

The idea behind Genius Group and Four Seasons 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.