Correlation Between TAL Education and NISSAN CHEMICAL

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

Diversification Opportunities for TAL Education and NISSAN CHEMICAL

-0.23

Correlation Coefficient

TAL Education  NISSAN CHEMICAL

Very good diversification

The 3 months correlation between TAL and NISSAN is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding TAL Education Group and NISSAN CHEMICAL IND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NISSAN CHEMICAL IND 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 NISSAN CHEMICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NISSAN CHEMICAL IND has no effect on the direction of TAL Education i.e., TAL Education and NISSAN CHEMICAL go up and down completely randomly.

Pair Corralation between TAL Education and NISSAN CHEMICAL

Assuming the 90 days trading horizon TAL Education Group is expected to generate 1.96 times more return on investment than NISSAN CHEMICAL. However, TAL Education is 1.96 times more volatile than NISSAN CHEMICAL IND. It trades about 0.01 of its potential returns per unit of risk. NISSAN CHEMICAL IND is currently generating about -0.28 per unit of risk. If you would invest  935.00  in TAL Education Group on September 20, 2024 and sell it today you would lose (5.00) from holding TAL Education Group or give up 0.53% of portfolio value over 90 days.

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

TAL Education Group  vs.  NISSAN CHEMICAL IND

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 fragile basic indicators, TAL Education unveiled solid returns over the last few months and may actually be approaching a breakup point.

NISSAN CHEMICAL IND

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NISSAN CHEMICAL IND has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental 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 NISSAN CHEMICAL

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

The idea behind TAL Education Group and NISSAN CHEMICAL IND 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.