Correlation Between TAL Education and Deutsche Post

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

Diversification Opportunities for TAL Education and Deutsche Post

0.45

Correlation Coefficient

TAL Education  Deutsche Post

Very weak diversification

The 3 months correlation between TAL and Deutsche is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding TAL Education Group and Deutsche Post AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Post AG 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 Deutsche Post. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Post AG has no effect on the direction of TAL Education i.e., TAL Education and Deutsche Post go up and down completely randomly.

Pair Corralation between TAL Education and Deutsche Post

Assuming the 90 days trading horizon TAL Education Group is expected to generate 3.17 times more return on investment than Deutsche Post. However, TAL Education is 3.17 times more volatile than Deutsche Post AG. It trades about 0.04 of its potential returns per unit of risk. Deutsche Post AG is currently generating about -0.01 per unit of risk. If you would invest  585.00  in TAL Education Group on October 24, 2024 and sell it today you would earn a total of  255.00  from holding TAL Education Group or generate 43.59% return on investment over 90 days.

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

TAL Education Group  vs.  Deutsche Post AG

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

Deutsche Post AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deutsche Post AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Deutsche Post is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with TAL Education and Deutsche Post

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

The idea behind TAL Education Group and Deutsche Post AG 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.