Correlation Between CHINA EDUCATION and DENSO P

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

Diversification Opportunities for CHINA EDUCATION and DENSO P

0.2

Correlation Coefficient

CHINA EDUCATION  DENSO P

Modest diversification

The 3 months correlation between CHINA and DENSO is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding CHINA EDUCATION GROUP and DENSO P ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DENSO P ADR 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 DENSO P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DENSO P ADR has no effect on the direction of CHINA EDUCATION i.e., CHINA EDUCATION and DENSO P go up and down completely randomly.

Pair Corralation between CHINA EDUCATION and DENSO P

Assuming the 90 days horizon CHINA EDUCATION GROUP is expected to generate 2.18 times more return on investment than DENSO P. However, CHINA EDUCATION is 2.18 times more volatile than DENSO P ADR. It trades about 0.11 of its potential returns per unit of risk. DENSO P ADR is currently generating about 0.04 per unit of risk. If you would invest  25.00  in CHINA EDUCATION GROUP on April 20, 2025 and sell it today you would earn a total of  6.00  from holding CHINA EDUCATION GROUP or generate 24.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

CHINA EDUCATION GROUP  vs.  DENSO P ADR

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.

DENSO P ADR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DENSO P ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, DENSO P is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CHINA EDUCATION and DENSO P

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

The idea behind CHINA EDUCATION GROUP and DENSO P ADR 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.