Correlation Between TAL Education and SBA Communications

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

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

Diversification Opportunities for TAL Education and SBA Communications

0.04

Correlation Coefficient

TAL Education  SBA Communications

Significant diversification

The 3 months correlation between TAL and SBA is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding TAL Education Group and SBA Communications Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBA Communications Corp and TAL Education 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 TAL Education Group are associated (or correlated) with SBA Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBA Communications Corp has no effect on the direction of TAL Education i.e., TAL Education and SBA Communications go up and down completely randomly.

Pair Corralation between TAL Education and SBA Communications

Assuming the 90 days trading horizon TAL Education Group is expected to generate 3.12 times more return on investment than SBA Communications. However, TAL Education is 3.12 times more volatile than SBA Communications Corp. It trades about 0.01 of its potential returns per unit of risk. SBA Communications Corp is currently generating about -0.51 per unit of risk. If you would invest  935.00  in TAL Education Group on September 23, 2024 and sell it today you would earn a total of  0.00  from holding TAL Education Group or generate 0.0% return on investment over 90 days.

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

TAL Education Group  vs.  SBA Communications Corp

TAL Education Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TAL Education Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, TAL Education unveiled solid returns over the last few months and may actually be approaching a breakup point.

SBA Communications Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SBA Communications Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with TAL Education and SBA Communications

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

The idea behind TAL Education Group and SBA Communications Corp 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.