Correlation Between Ambow Education and Elite Education

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

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

Diversification Opportunities for Ambow Education and Elite Education

-0.03

Correlation Coefficient

Ambow Education  Elite Education

Good diversification

The 3 months correlation between Ambow and Elite is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Ambow Education Holding and Elite Education Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elite Education Group and Ambow 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 Ambow Education Holding are associated (or correlated) with Elite Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elite Education Group has no effect on the direction of Ambow Education i.e., Ambow Education and Elite Education go up and down completely randomly.

Pair Corralation between Ambow Education and Elite Education

Given the investment horizon of 90 days Ambow Education Holding is expected to generate 3.91 times more return on investment than Elite Education. However, Ambow Education is 3.91 times more volatile than Elite Education Group. It trades about 0.14 of its potential returns per unit of risk. Elite Education Group is currently generating about 0.03 per unit of risk. If you would invest  145.00  in Ambow Education Holding on September 25, 2024 and sell it today you would earn a total of  30.00  from holding Ambow Education Holding or generate 20.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Ambow Education Holding  vs.  Elite Education Group

Ambow Education Holding

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ambow Education Holding are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental drivers, Ambow Education displayed solid returns over the last few months and may actually be approaching a breakup point.

Elite Education Group

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Elite Education Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent forward indicators, Elite Education reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ambow Education and Elite Education

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

The idea behind Ambow Education Holding and Elite 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.