Correlation Between TAL Education and FAST RETAIL

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

Diversification Opportunities for TAL Education and FAST RETAIL

-0.04

Correlation Coefficient

TAL Education  FAST RETAIL

Good diversification

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

Pair Corralation between TAL Education and FAST RETAIL

Assuming the 90 days trading horizon TAL Education is expected to generate 1.38 times less return on investment than FAST RETAIL. In addition to that, TAL Education is 2.16 times more volatile than FAST RETAIL ADR. It trades about 0.02 of its total potential returns per unit of risk. FAST RETAIL ADR is currently generating about 0.07 per unit of volatility. If you would invest  1,781  in FAST RETAIL ADR on September 28, 2024 and sell it today you would earn a total of  1,419  from holding FAST RETAIL ADR or generate 79.67% return on investment over 90 days.

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

TAL Education Group  vs.  FAST RETAIL ADR

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 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.

FAST RETAIL ADR

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FAST RETAIL ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FAST RETAIL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with TAL Education and FAST RETAIL

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

The idea behind TAL Education Group and FAST RETAIL ADR 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.