Correlation Between TAL Education and Ke Holdings

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

Diversification Opportunities for TAL Education and Ke Holdings

0.83

Correlation Coefficient

TAL Education  Ke Holdings

Very poor diversification

The 3 months correlation between TAL and BEKE is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding TAL Education Group and Ke Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ke Holdings 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 Ke Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ke Holdings has no effect on the direction of TAL Education i.e., TAL Education and Ke Holdings go up and down completely randomly.

Pair Corralation between TAL Education and Ke Holdings

Considering the 90-day investment horizon TAL Education Group is expected to generate 1.19 times more return on investment than Ke Holdings. However, TAL Education is 1.19 times more volatile than Ke Holdings. It trades about 0.03 of its potential returns per unit of risk. Ke Holdings is currently generating about 0.04 per unit of risk. If you would invest  741.00  in TAL Education Group on September 19, 2024 and sell it today you would earn a total of  250.00  from holding TAL Education Group or generate 33.74% return on investment over 90 days.

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

TAL Education Group  vs.  Ke Holdings

TAL Education Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TAL Education Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, TAL Education disclosed solid returns over the last few months and may actually be approaching a breakup point.

Ke Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ke Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent forward-looking signals, Ke Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TAL Education and Ke Holdings

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

The idea behind TAL Education Group and Ke Holdings 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.