Correlation Between Strategic Education and Ambow Education

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

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

Diversification Opportunities for Strategic Education and Ambow Education

-0.39

Correlation Coefficient

Strategic Education  Ambow Education

Very good diversification

The 3 months correlation between Strategic and Ambow is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Education and Ambow Education Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambow Education Holding and Strategic 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 Strategic Education are associated (or correlated) with Ambow Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambow Education Holding has no effect on the direction of Strategic Education i.e., Strategic Education and Ambow Education go up and down completely randomly.

Pair Corralation between Strategic Education and Ambow Education

Given the investment horizon of 90 days Strategic Education is expected to under-perform the Ambow Education. But the stock apears to be less risky and, when comparing its historical volatility, Strategic Education is 10.8 times less risky than Ambow Education. The stock trades about -0.05 of its potential returns per unit of risk. The Ambow Education Holding is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  133.00  in Ambow Education Holding on September 1, 2024 and sell it today you would earn a total of  47.00  from holding Ambow Education Holding or generate 35.34% return on investment over 90 days.

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

Strategic Education  vs.  Ambow Education Holding

Strategic Education

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Education are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Strategic Education is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Ambow Education Holding

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ambow Education Holding are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental drivers, Ambow Education displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Strategic Education and Ambow Education

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

The idea behind Strategic Education and Ambow Education Holding 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.