Correlation Between Wah Fu and Elite Education

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

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

Diversification Opportunities for Wah Fu and Elite Education

-0.03

Correlation Coefficient

Wah Fu  Elite Education

Good diversification

The 3 months correlation between Wah and Elite is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Wah Fu Education 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 Wah Fu 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 Wah Fu Education 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 Wah Fu i.e., Wah Fu and Elite Education go up and down completely randomly.

Pair Corralation between Wah Fu and Elite Education

Given the investment horizon of 90 days Wah Fu Education is expected to generate 2.11 times more return on investment than Elite Education. However, Wah Fu is 2.11 times more volatile than Elite Education Group. It trades about 0.03 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  173.00  in Wah Fu Education on December 27, 2024 and sell it today you would lose (8.00) from holding Wah Fu Education or give up 4.62% of portfolio value over 90 days.

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

Wah Fu Education  vs.  Elite Education Group

Wah Fu Education

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wah Fu Education are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Wah Fu unveiled 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 Wah Fu and Elite Education

The main advantage of trading using opposite Wah Fu and Elite Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wah Fu 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 Wah Fu Education 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.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.