Can any of the company-specific risk be diversified away by investing in both Ambow Education and Exceed World 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 Ambow Education and Exceed World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ambow Education Holding and Exceed World, you can compare the effects of market volatilities on Ambow Education and Exceed World 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 Ambow Education with a short position of Exceed World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ambow Education and Exceed World.
Diversification Opportunities for Ambow Education and Exceed World
The 3 months correlation between Ambow and Exceed is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ambow Education Holding and Exceed World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exceed World and Ambow 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 Ambow Education Holding are associated (or correlated) with Exceed World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exceed World has no effect on the direction of Ambow Education i.e., Ambow Education and Exceed World go up and down completely randomly.
Pair Corralation between Ambow Education and Exceed World
Given the investment horizon of 90 days Ambow Education Holding is expected to under-perform the Exceed World. But the stock apears to be less risky and, when comparing its historical volatility, Ambow Education Holding is 2.02 times less risky than Exceed World. The stock trades about -0.19 of its potential returns per unit of risk. The Exceed World is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 51.00 in Exceed World on March 6, 2024 and sell it today you would earn a total of 14.00 from holding Exceed World or generate 27.45% return on investment over 90 days.
Over the last 90 days Ambow Education Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.
Compared to the overall equity markets, risk-adjusted returns on investments in Exceed World are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, Exceed World showed solid returns over the last few months and may actually be approaching a breakup point.