Correlation Between Swire Properties and TAL Education

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

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

Diversification Opportunities for Swire Properties and TAL Education

0.51

Correlation Coefficient

Swire Properties  TAL Education

Very weak diversification

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

Pair Corralation between Swire Properties and TAL Education

Assuming the 90 days horizon Swire Properties Limited is expected to generate 0.74 times more return on investment than TAL Education. However, Swire Properties Limited is 1.36 times less risky than TAL Education. It trades about 0.07 of its potential returns per unit of risk. TAL Education Group is currently generating about 0.01 per unit of risk. If you would invest  183.00  in Swire Properties Limited on September 27, 2024 and sell it today you would earn a total of  5.00  from holding Swire Properties Limited or generate 2.73% return on investment over 90 days.

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

Swire Properties Limited  vs.  TAL Education Group

Swire Properties

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Swire Properties Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Swire Properties may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 comparatively stable basic indicators, TAL Education is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Swire Properties and TAL Education

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

The idea behind Swire Properties Limited and TAL Education Group 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.