Correlation Between Gray Television and TAL Education

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

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

Diversification Opportunities for Gray Television and TAL Education

0.34

Correlation Coefficient

Gray Television  TAL Education

Weak diversification

The 3 months correlation between Gray and TAL is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Gray Television and TAL Education Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TAL Education Group and Gray Television 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 Gray Television are associated (or correlated) with TAL Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TAL Education Group has no effect on the direction of Gray Television i.e., Gray Television and TAL Education go up and down completely randomly.

Pair Corralation between Gray Television and TAL Education

Considering the 90-day investment horizon Gray Television is expected to generate 1.69 times more return on investment than TAL Education. However, Gray Television is 1.69 times more volatile than TAL Education Group. It trades about 0.05 of its potential returns per unit of risk. TAL Education Group is currently generating about -0.4 per unit of risk. If you would invest  449.00  in Gray Television on June 9, 2024 and sell it today you would earn a total of  10.00  from holding Gray Television or generate 2.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Gray Television  vs.  TAL Education Group

Gray Television

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gray Television has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

TAL Education Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TAL Education Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in October 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Gray Television and TAL Education

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

The idea behind Gray Television and TAL Education Group 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.