Correlation Between CHINA EDUCATION and LINMON MEDIA

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

By analyzing existing cross correlation between CHINA EDUCATION GROUP and LINMON MEDIA LTD, you can compare the effects of market volatilities on CHINA EDUCATION and LINMON MEDIA 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 CHINA EDUCATION with a short position of LINMON MEDIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA EDUCATION and LINMON MEDIA.

Diversification Opportunities for CHINA EDUCATION and LINMON MEDIA

0.5

Correlation Coefficient

CHINA EDUCATION  LINMON MEDIA

Very weak diversification

The 3 months correlation between CHINA and LINMON is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding CHINA EDUCATION GROUP and LINMON MEDIA LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LINMON MEDIA LTD and CHINA EDUCATION 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 CHINA EDUCATION GROUP are associated (or correlated) with LINMON MEDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LINMON MEDIA LTD has no effect on the direction of CHINA EDUCATION i.e., CHINA EDUCATION and LINMON MEDIA go up and down completely randomly.

Pair Corralation between CHINA EDUCATION and LINMON MEDIA

Assuming the 90 days horizon CHINA EDUCATION is expected to generate 1.64 times less return on investment than LINMON MEDIA. But when comparing it to its historical volatility, CHINA EDUCATION GROUP is 1.5 times less risky than LINMON MEDIA. It trades about 0.11 of its potential returns per unit of risk. LINMON MEDIA LTD is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  28.00  in LINMON MEDIA LTD on April 20, 2025 and sell it today you would earn a total of  11.00  from holding LINMON MEDIA LTD or generate 39.29% return on investment over 90 days.

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

CHINA EDUCATION GROUP  vs.  LINMON MEDIA LTD

CHINA EDUCATION GROUP

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA EDUCATION GROUP are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CHINA EDUCATION reported solid returns over the last few months and may actually be approaching a breakup point.

LINMON MEDIA LTD

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LINMON MEDIA LTD are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, LINMON MEDIA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CHINA EDUCATION and LINMON MEDIA

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

The idea behind CHINA EDUCATION GROUP and LINMON MEDIA LTD 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.