Correlation Between Wah Fu and Tarena International

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

Diversification Opportunities for Wah Fu and Tarena International

0.62

Correlation Coefficient

Wah Fu  Tarena International

Poor diversification

The 3 months correlation between Wah and Tarena is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Wah Fu Education and Tarena International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tarena International 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 Tarena International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tarena International has no effect on the direction of Wah Fu i.e., Wah Fu and Tarena International go up and down completely randomly.

Pair Corralation between Wah Fu and Tarena International

Given the investment horizon of 90 days Wah Fu Education is expected to generate 0.46 times more return on investment than Tarena International. However, Wah Fu Education is 2.17 times less risky than Tarena International. It trades about -0.01 of its potential returns per unit of risk. Tarena International is currently generating about -0.01 per unit of risk. If you would invest  188.00  in Wah Fu Education on September 1, 2024 and sell it today you would lose (19.00) from holding Wah Fu Education or give up 10.11% of portfolio value over 90 days.

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

Wah Fu Education  vs.  Tarena International

Wah Fu Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wah Fu Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Wah Fu is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Tarena International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tarena International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Wah Fu and Tarena International

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

The idea behind Wah Fu Education and Tarena International 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.