Correlation Between TAL Education and Swire Properties

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

Diversification Opportunities for TAL Education and Swire Properties

0.51

Correlation Coefficient

TAL Education  Swire Properties

Very weak diversification

The 3 months correlation between TAL and Swire is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding TAL Education Group and Swire Properties Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swire Properties 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 Swire Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swire Properties has no effect on the direction of TAL Education i.e., TAL Education and Swire Properties go up and down completely randomly.

Pair Corralation between TAL Education and Swire Properties

Assuming the 90 days trading horizon TAL Education is expected to generate 14.73 times less return on investment than Swire Properties. But when comparing it to its historical volatility, TAL Education Group is 1.17 times less risky than Swire Properties. It trades about 0.01 of its potential returns per unit of risk. Swire Properties Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  81.00  in Swire Properties Limited on September 28, 2024 and sell it today you would earn a total of  107.00  from holding Swire Properties Limited or generate 132.1% 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.  Swire Properties Limited

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.

Swire Properties

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Swire Properties Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Swire Properties may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with TAL Education and Swire Properties

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

The idea behind TAL Education Group and Swire Properties Limited 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.