Correlation Between Four Seasons and Puxin

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

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

Diversification Opportunities for Four Seasons and Puxin

0.05

Correlation Coefficient

Four Seasons  Puxin

Significant diversification

The 3 months correlation between Four and Puxin is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Four Seasons Education and Puxin Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Puxin Limited and Four Seasons 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 Four Seasons Education are associated (or correlated) with Puxin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Puxin Limited has no effect on the direction of Four Seasons i.e., Four Seasons and Puxin go up and down completely randomly.

Pair Corralation between Four Seasons and Puxin

Given the investment horizon of 90 days Four Seasons is expected to generate 4.66 times less return on investment than Puxin. But when comparing it to its historical volatility, Four Seasons Education is 1.24 times less risky than Puxin. It trades about 0.05 of its potential returns per unit of risk. Puxin Limited is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1.00  in Puxin Limited on September 3, 2024 and sell it today you would earn a total of  0.70  from holding Puxin Limited or generate 70.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	9.49%
Values	Daily Returns

Four Seasons Education  vs.  Puxin Limited

Four Seasons Education

Risk-Adjusted Performance

0 of 100

Very Weak

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

Puxin Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Puxin Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Puxin is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Four Seasons and Puxin

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

The idea behind Four Seasons Education and Puxin Limited 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.