Correlation Between TFS FINANCIAL and G8 EDUCATION

Can any of the company-specific risk be diversified away by investing in both TFS FINANCIAL and G8 EDUCATION 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 TFS FINANCIAL and G8 EDUCATION into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TFS FINANCIAL and G8 EDUCATION, you can compare the effects of market volatilities on TFS FINANCIAL and G8 EDUCATION 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 TFS FINANCIAL with a short position of G8 EDUCATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of TFS FINANCIAL and G8 EDUCATION.

Diversification Opportunities for TFS FINANCIAL and G8 EDUCATION

-0.29

Correlation Coefficient

TFS FINANCIAL  G8 EDUCATION

Very good diversification

The 3 months correlation between TFS and 3EAG is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding TFS FINANCIAL and G8 EDUCATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G8 EDUCATION and TFS FINANCIAL 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 TFS FINANCIAL are associated (or correlated) with G8 EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G8 EDUCATION has no effect on the direction of TFS FINANCIAL i.e., TFS FINANCIAL and G8 EDUCATION go up and down completely randomly.

Pair Corralation between TFS FINANCIAL and G8 EDUCATION

Assuming the 90 days trading horizon TFS FINANCIAL is expected to under-perform the G8 EDUCATION. In addition to that, TFS FINANCIAL is 1.2 times more volatile than G8 EDUCATION. It trades about -0.37 of its total potential returns per unit of risk. G8 EDUCATION is currently generating about -0.27 per unit of volatility. If you would invest  82.00  in G8 EDUCATION on October 4, 2024 and sell it today you would lose (4.00) from holding G8 EDUCATION or give up 4.88% of portfolio value over 90 days.

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

TFS FINANCIAL  vs.  G8 EDUCATION

TFS FINANCIAL

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TFS FINANCIAL are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, TFS FINANCIAL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

G8 EDUCATION

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days G8 EDUCATION has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with TFS FINANCIAL and G8 EDUCATION

The main advantage of trading using opposite TFS FINANCIAL and G8 EDUCATION positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TFS FINANCIAL position performs unexpectedly, G8 EDUCATION 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 G8 EDUCATION will offset losses from the drop in G8 EDUCATION's long position.

The idea behind TFS FINANCIAL and G8 EDUCATION 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.