Correlation Between TAL Education and SPORT LISBOA

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

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

Diversification Opportunities for TAL Education and SPORT LISBOA

0.41

Correlation Coefficient

TAL Education  SPORT LISBOA

Very weak diversification

The 3 months correlation between TAL and SPORT is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding TAL Education Group and SPORT LISBOA E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPORT LISBOA E and TAL 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 TAL Education Group are associated (or correlated) with SPORT LISBOA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPORT LISBOA E has no effect on the direction of TAL Education i.e., TAL Education and SPORT LISBOA go up and down completely randomly.

Pair Corralation between TAL Education and SPORT LISBOA

Assuming the 90 days trading horizon TAL Education Group is expected to under-perform the SPORT LISBOA. But the stock apears to be less risky and, when comparing its historical volatility, TAL Education Group is 1.07 times less risky than SPORT LISBOA. The stock trades about -0.02 of its potential returns per unit of risk. The SPORT LISBOA E is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  368.00  in SPORT LISBOA E on April 24, 2025 and sell it today you would earn a total of  176.00  from holding SPORT LISBOA E or generate 47.83% return on investment over 90 days.

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

TAL Education Group  vs.  SPORT LISBOA E

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. In spite of comparatively stable basic indicators, TAL Education is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

SPORT LISBOA E

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPORT LISBOA E are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, SPORT LISBOA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TAL Education and SPORT LISBOA

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

The idea behind TAL Education Group and SPORT LISBOA E 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.