Correlation Between TAL Education and Air Products

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

Diversification Opportunities for TAL Education and Air Products

-0.4

Correlation Coefficient

TAL Education  Air Products

Very good diversification

The 3 months correlation between TAL and Air is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding TAL Education Group and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products 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 Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products has no effect on the direction of TAL Education i.e., TAL Education and Air Products go up and down completely randomly.

Pair Corralation between TAL Education and Air Products

Assuming the 90 days trading horizon TAL Education is expected to generate 2.73 times less return on investment than Air Products. In addition to that, TAL Education is 2.21 times more volatile than Air Products and. It trades about 0.01 of its total potential returns per unit of risk. Air Products and is currently generating about 0.08 per unit of volatility. If you would invest  23,298  in Air Products and on October 8, 2024 and sell it today you would earn a total of  4,312  from holding Air Products and or generate 18.51% return on investment over 90 days.

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

TAL Education Group  vs.  Air Products and

TAL Education Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TAL Education Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, TAL Education is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Air Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air Products and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Air Products is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with TAL Education and Air Products

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

The idea behind TAL Education Group and Air Products and 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.