Correlation Between Cogna Educao and TAL Education

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

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

Diversification Opportunities for Cogna Educao and TAL Education

-0.07

Correlation Coefficient

Cogna Educao  TAL Education

Good diversification

The 3 months correlation between Cogna and TAL is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Cogna Educao SA 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 Cogna Educao 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 Cogna Educao SA 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 Cogna Educao i.e., Cogna Educao and TAL Education go up and down completely randomly.

Pair Corralation between Cogna Educao and TAL Education

Assuming the 90 days trading horizon Cogna Educao is expected to generate 50.27 times less return on investment than TAL Education. But when comparing it to its historical volatility, Cogna Educao SA is 1.06 times less risky than TAL Education. It trades about 0.0 of its potential returns per unit of risk. TAL Education Group is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  460.00  in TAL Education Group on September 3, 2024 and sell it today you would earn a total of  138.00  from holding TAL Education Group or generate 30.0% return on investment over 90 days.

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

Cogna Educao SA  vs.  TAL Education Group

Cogna Educao SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cogna Educao SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cogna Educao is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

TAL Education Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TAL Education Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, TAL Education sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cogna Educao and TAL Education

The main advantage of trading using opposite Cogna Educao and TAL Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cogna Educao 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 Cogna Educao SA 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.