Correlation Between Four Seasons and Q2 Holdings

Can any of the company-specific risk be diversified away by investing in both Four Seasons and Q2 Holdings 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 Q2 Holdings 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 Q2 Holdings, you can compare the effects of market volatilities on Four Seasons and Q2 Holdings 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 Q2 Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Four Seasons and Q2 Holdings.

Diversification Opportunities for Four Seasons and Q2 Holdings

-0.31

Correlation Coefficient

Four Seasons  Q2 Holdings

Very good diversification

The 3 months correlation between Four and QTWO is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Four Seasons Education and Q2 Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Q2 Holdings 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 Q2 Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Q2 Holdings has no effect on the direction of Four Seasons i.e., Four Seasons and Q2 Holdings go up and down completely randomly.

Pair Corralation between Four Seasons and Q2 Holdings

Given the investment horizon of 90 days Four Seasons is expected to generate 2.51 times less return on investment than Q2 Holdings. In addition to that, Four Seasons is 1.62 times more volatile than Q2 Holdings. It trades about 0.06 of its total potential returns per unit of risk. Q2 Holdings is currently generating about 0.23 per unit of volatility. If you would invest  7,461  in Q2 Holdings on September 15, 2024 and sell it today you would earn a total of  3,049  from holding Q2 Holdings or generate 40.87% return on investment over 90 days.

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

Four Seasons Education  vs.  Q2 Holdings

Four Seasons Education

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Four Seasons Education are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Four Seasons unveiled solid returns over the last few months and may actually be approaching a breakup point.

Q2 Holdings

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Q2 Holdings are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Q2 Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Four Seasons and Q2 Holdings

The main advantage of trading using opposite Four Seasons and Q2 Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Four Seasons position performs unexpectedly, Q2 Holdings 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 Q2 Holdings will offset losses from the drop in Q2 Holdings' long position.

The idea behind Four Seasons Education and Q2 Holdings 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.