Correlation Between TAL Education and Scientific Games

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

Diversification Opportunities for TAL Education and Scientific Games

0.5

Correlation Coefficient

TAL Education  Scientific Games

Very weak diversification

The 3 months correlation between TAL and Scientific is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding TAL Education Group and Scientific Games in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scientific Games 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 Scientific Games. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scientific Games has no effect on the direction of TAL Education i.e., TAL Education and Scientific Games go up and down completely randomly.

Pair Corralation between TAL Education and Scientific Games

Assuming the 90 days trading horizon TAL Education Group is expected to generate 1.86 times more return on investment than Scientific Games. However, TAL Education is 1.86 times more volatile than Scientific Games. It trades about 0.14 of its potential returns per unit of risk. Scientific Games is currently generating about 0.05 per unit of risk. If you would invest  935.00  in TAL Education Group on November 29, 2024 and sell it today you would earn a total of  345.00  from holding TAL Education Group or generate 36.9% 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.  Scientific Games

TAL Education Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TAL Education Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, TAL Education unveiled solid returns over the last few months and may actually be approaching a breakup point.

Scientific Games

Risk-Adjusted Performance

Insignificant

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

Pair Trading with TAL Education and Scientific Games

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

The idea behind TAL Education Group and Scientific Games 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.