Correlation Between TAL Education and Four Seasons

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

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

Diversification Opportunities for TAL Education and Four Seasons

-0.5

Correlation Coefficient

TAL Education  Four Seasons

Very good diversification

The 3 months correlation between TAL and Four is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding TAL Education Group and Four Seasons Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Four Seasons Education and TAL 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 TAL Education Group are associated (or correlated) with Four Seasons. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Four Seasons Education has no effect on the direction of TAL Education i.e., TAL Education and Four Seasons go up and down completely randomly.

Pair Corralation between TAL Education and Four Seasons

Considering the 90-day investment horizon TAL Education Group is expected to generate 0.51 times more return on investment than Four Seasons. However, TAL Education Group is 1.96 times less risky than Four Seasons. It trades about 0.22 of its potential returns per unit of risk. Four Seasons Education is currently generating about -0.08 per unit of risk. If you would invest  1,113  in TAL Education Group on February 4, 2024 and sell it today you would earn a total of  205.00  from holding TAL Education Group or generate 18.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	77.27%
Values	Daily Returns

TAL Education Group  vs.  Four Seasons Education

TAL Education Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TAL Education Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, TAL Education disclosed solid returns over the last few months and may actually be approaching a breakup point.

Four Seasons Education

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Four Seasons Education are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Four Seasons may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with TAL Education and Four Seasons

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

The idea behind TAL Education Group and Four Seasons Education 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.