Correlation Between GAEC Educacao and TAL Education

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

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

Diversification Opportunities for GAEC Educacao and TAL Education

-0.21

Correlation Coefficient

GAEC Educacao  TAL Education

Very good diversification

The 3 months correlation between GAEC and TAL is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding GAEC Educacao 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 GAEC Educacao 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 GAEC Educacao 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 GAEC Educacao i.e., GAEC Educacao and TAL Education go up and down completely randomly.

Pair Corralation between GAEC Educacao and TAL Education

Assuming the 90 days trading horizon GAEC Educacao SA is expected to generate 1.1 times more return on investment than TAL Education. However, GAEC Educacao is 1.1 times more volatile than TAL Education Group. It trades about 0.18 of its potential returns per unit of risk. TAL Education Group is currently generating about -0.06 per unit of risk. If you would invest  247.00  in GAEC Educacao SA on March 26, 2025 and sell it today you would earn a total of  163.00  from holding GAEC Educacao SA or generate 65.99% return on investment over 90 days.

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

GAEC Educacao SA  vs.  TAL Education Group

GAEC Educacao SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GAEC Educacao SA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GAEC Educacao unveiled solid returns over the last few months and may actually be approaching a breakup point.

TAL Education Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days TAL Education Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in July 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with GAEC Educacao and TAL Education

The main advantage of trading using opposite GAEC Educacao and TAL Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GAEC Educacao 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 GAEC Educacao 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.