Correlation Between CHINA EAST and Chegg

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

By analyzing existing cross correlation between CHINA EAST ED and Chegg Inc, you can compare the effects of market volatilities on CHINA EAST and Chegg 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 CHINA EAST with a short position of Chegg. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA EAST and Chegg.

Diversification Opportunities for CHINA EAST and Chegg

0.23

Correlation Coefficient

CHINA EAST  Chegg

Modest diversification

The 3 months correlation between CHINA and Chegg is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding CHINA EAST ED and Chegg Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chegg Inc and CHINA EAST 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 CHINA EAST ED are associated (or correlated) with Chegg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chegg Inc has no effect on the direction of CHINA EAST i.e., CHINA EAST and Chegg go up and down completely randomly.

Pair Corralation between CHINA EAST and Chegg

Assuming the 90 days horizon CHINA EAST ED is expected to generate 0.4 times more return on investment than Chegg. However, CHINA EAST ED is 2.52 times less risky than Chegg. It trades about 0.07 of its potential returns per unit of risk. Chegg Inc is currently generating about -0.04 per unit of risk. If you would invest  31.00  in CHINA EAST ED on September 23, 2024 and sell it today you would earn a total of  1.00  from holding CHINA EAST ED or generate 3.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

CHINA EAST ED  vs.  Chegg Inc

CHINA EAST ED

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA EAST ED are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CHINA EAST reported solid returns over the last few months and may actually be approaching a breakup point.

Chegg Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chegg Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Chegg reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CHINA EAST and Chegg

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

The idea behind CHINA EAST ED and Chegg Inc 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.