Correlation Between CHINA EDUCATION and Gap

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

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

Diversification Opportunities for CHINA EDUCATION and Gap

-0.65

Correlation Coefficient

CHINA EDUCATION  Gap

Excellent diversification

The 3 months correlation between CHINA and Gap is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding CHINA EDUCATION GROUP and The Gap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gap and CHINA 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 CHINA EDUCATION GROUP are associated (or correlated) with Gap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gap has no effect on the direction of CHINA EDUCATION i.e., CHINA EDUCATION and Gap go up and down completely randomly.

Pair Corralation between CHINA EDUCATION and Gap

Assuming the 90 days horizon CHINA EDUCATION is expected to generate 1.22 times less return on investment than Gap. In addition to that, CHINA EDUCATION is 1.35 times more volatile than The Gap. It trades about 0.04 of its total potential returns per unit of risk. The Gap is currently generating about 0.07 per unit of volatility. If you would invest  983.00  in The Gap on September 14, 2024 and sell it today you would earn a total of  1,339  from holding The Gap or generate 136.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

CHINA EDUCATION GROUP  vs.  The Gap

CHINA EDUCATION GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHINA EDUCATION GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CHINA EDUCATION is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Gap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Gap unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CHINA EDUCATION and Gap

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

The idea behind CHINA EDUCATION GROUP and The Gap 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.