Correlation Between TAL Education and RLX Technology

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

Diversification Opportunities for TAL Education and RLX Technology

0.05

Correlation Coefficient

TAL Education  RLX Technology

Significant diversification

The 3 months correlation between TAL and RLX is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding TAL Education Group and RLX Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RLX Technology 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 RLX Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RLX Technology has no effect on the direction of TAL Education i.e., TAL Education and RLX Technology go up and down completely randomly.

Pair Corralation between TAL Education and RLX Technology

Considering the 90-day investment horizon TAL Education Group is expected to generate 1.13 times more return on investment than RLX Technology. However, TAL Education is 1.13 times more volatile than RLX Technology. It trades about 0.03 of its potential returns per unit of risk. RLX Technology is currently generating about 0.01 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

TAL Education Group  vs.  RLX Technology

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.

RLX Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RLX Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent essential indicators, RLX Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TAL Education and RLX Technology

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

The idea behind TAL Education Group and RLX Technology 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.