Correlation Between APPLE and TAL Education

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

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

Diversification Opportunities for APPLE and TAL Education

-0.25

Correlation Coefficient

APPLE  TAL Education

Very good diversification

The 3 months correlation between APPLE and TAL is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding APPLE INC 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 APPLE 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 APPLE INC 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 APPLE i.e., APPLE and TAL Education go up and down completely randomly.

Pair Corralation between APPLE and TAL Education

Assuming the 90 days trading horizon APPLE INC is expected to under-perform the TAL Education. But the bond apears to be less risky and, when comparing its historical volatility, APPLE INC is 5.9 times less risky than TAL Education. The bond trades about -0.2 of its potential returns per unit of risk. The TAL Education Group is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,162  in TAL Education Group on January 19, 2024 and sell it today you would earn a total of  0.00  from holding TAL Education Group or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.91%
Values	Daily Returns

APPLE INC  vs.  TAL Education Group

APPLE INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days APPLE INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, APPLE is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

TAL Education Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TAL Education Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, TAL Education may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with APPLE and TAL Education

The main advantage of trading using opposite APPLE and TAL Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APPLE 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 APPLE INC 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.