Correlation Between TAL Education and ETFS Coffee

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

Diversification Opportunities for TAL Education and ETFS Coffee

-0.17

Correlation Coefficient

TAL Education  ETFS Coffee

Good diversification

The 3 months correlation between TAL and ETFS is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding TAL Education Group and ETFS Coffee ETC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETFS Coffee ETC 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 ETFS Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETFS Coffee ETC has no effect on the direction of TAL Education i.e., TAL Education and ETFS Coffee go up and down completely randomly.

Pair Corralation between TAL Education and ETFS Coffee

Assuming the 90 days trading horizon TAL Education Group is expected to generate 1.72 times more return on investment than ETFS Coffee. However, TAL Education is 1.72 times more volatile than ETFS Coffee ETC. It trades about -0.02 of its potential returns per unit of risk. ETFS Coffee ETC is currently generating about -0.14 per unit of risk. If you would invest  980.00  in TAL Education Group on April 23, 2025 and sell it today you would lose (95.00) from holding TAL Education Group or give up 9.69% of portfolio value over 90 days.

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

TAL Education Group  vs.  ETFS Coffee ETC

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

ETFS Coffee ETC

Risk-Adjusted Performance

Very Weak

Over the last 90 days ETFS Coffee ETC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in August 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with TAL Education and ETFS Coffee

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

The idea behind TAL Education Group and ETFS Coffee ETC 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.