Correlation Between Prime Securities and Ambow Education

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

By analyzing existing cross correlation between Prime Securities Limited and Ambow Education Holding, you can compare the effects of market volatilities on Prime Securities and Ambow 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 Prime Securities with a short position of Ambow Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prime Securities and Ambow Education.

Diversification Opportunities for Prime Securities and Ambow Education

0.08

Correlation Coefficient

Prime Securities  Ambow Education

Significant diversification

The 3 months correlation between Prime and Ambow is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Prime Securities Limited and Ambow Education Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambow Education Holding and Prime Securities 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 Prime Securities Limited are associated (or correlated) with Ambow Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambow Education Holding has no effect on the direction of Prime Securities i.e., Prime Securities and Ambow Education go up and down completely randomly.

Pair Corralation between Prime Securities and Ambow Education

Assuming the 90 days trading horizon Prime Securities Limited is expected to generate 0.47 times more return on investment than Ambow Education. However, Prime Securities Limited is 2.12 times less risky than Ambow Education. It trades about 0.04 of its potential returns per unit of risk. Ambow Education Holding is currently generating about 0.0 per unit of risk. If you would invest  17,935  in Prime Securities Limited on February 6, 2024 and sell it today you would earn a total of  175.00  from holding Prime Securities Limited or generate 0.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	85.71%
Values	Daily Returns

Prime Securities Limited  vs.  Ambow Education Holding

Prime Securities

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Prime Securities Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Prime Securities is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Ambow Education Holding

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ambow Education Holding are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental drivers, Ambow Education displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prime Securities and Ambow Education

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

The idea behind Prime Securities Limited and Ambow Education Holding 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 Commodity Directory module to find actively traded commodities issued by global exchanges.