Correlation Between LESTE FDO and TAL Education

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

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

Diversification Opportunities for LESTE FDO and TAL Education

-0.38

Correlation Coefficient

LESTE FDO  TAL Education

Very good diversification

The 3 months correlation between LESTE and TAL is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding LESTE FDO INV 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 LESTE FDO 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 LESTE FDO INV 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 LESTE FDO i.e., LESTE FDO and TAL Education go up and down completely randomly.

Pair Corralation between LESTE FDO and TAL Education

Assuming the 90 days trading horizon LESTE FDO INV is expected to under-perform the TAL Education. But the fund apears to be less risky and, when comparing its historical volatility, LESTE FDO INV is 3.12 times less risky than TAL Education. The fund trades about -0.2 of its potential returns per unit of risk. The TAL Education Group is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  428.00  in TAL Education Group on September 18, 2024 and sell it today you would earn a total of  174.00  from holding TAL Education Group or generate 40.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

LESTE FDO INV  vs.  TAL Education Group

LESTE FDO INV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LESTE FDO INV has generated negative risk-adjusted returns adding no value to fund investors. Despite weak performance in the last few months, the Fund's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

TAL Education Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TAL Education Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, TAL Education sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LESTE FDO and TAL Education

The main advantage of trading using opposite LESTE FDO and TAL Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LESTE FDO 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 LESTE FDO INV 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.