Correlation Between CHINA EDUCATION and Textron

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

Diversification Opportunities for CHINA EDUCATION and Textron

0.8

Correlation Coefficient

CHINA EDUCATION  Textron

Very poor diversification

The 3 months correlation between CHINA and Textron is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding CHINA EDUCATION GROUP and Textron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Textron 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 Textron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Textron has no effect on the direction of CHINA EDUCATION i.e., CHINA EDUCATION and Textron go up and down completely randomly.

Pair Corralation between CHINA EDUCATION and Textron

Assuming the 90 days horizon CHINA EDUCATION GROUP is expected to generate 2.29 times more return on investment than Textron. However, CHINA EDUCATION is 2.29 times more volatile than Textron. It trades about 0.11 of its potential returns per unit of risk. Textron is currently generating about 0.22 per unit of risk. If you would invest  25.00  in CHINA EDUCATION GROUP on April 23, 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	Strong
Accuracy	100.0%
Values	Daily Returns

CHINA EDUCATION GROUP  vs.  Textron

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.

Textron

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Textron are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Textron reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CHINA EDUCATION and Textron

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

The idea behind CHINA EDUCATION GROUP and Textron 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.