Correlation Between TAL Education and Elite Education

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

Diversification Opportunities for TAL Education and Elite Education

-0.64

Correlation Coefficient

TAL Education  Elite Education

Excellent diversification

The 3 months correlation between TAL and Elite is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding TAL Education Group and Elite Education Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elite Education Group 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 Elite Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elite Education Group has no effect on the direction of TAL Education i.e., TAL Education and Elite Education go up and down completely randomly.

Pair Corralation between TAL Education and Elite Education

Considering the 90-day investment horizon TAL Education Group is expected to generate 1.02 times more return on investment than Elite Education. However, TAL Education is 1.02 times more volatile than Elite Education Group. It trades about 0.13 of its potential returns per unit of risk. Elite Education Group is currently generating about -0.11 per unit of risk. If you would invest  977.00  in TAL Education Group on December 27, 2024 and sell it today you would earn a total of  326.00  from holding TAL Education Group or generate 33.37% return on investment over 90 days.

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

TAL Education Group  vs.  Elite Education Group

TAL Education Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TAL Education Group are ranked lower than 10 (%) 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.

Elite Education Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Elite Education Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's forward indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with TAL Education and Elite Education

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

The idea behind TAL Education Group and Elite 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.