Correlation Between TAL Education and CM Hospitalar

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

Diversification Opportunities for TAL Education and CM Hospitalar

0.45

Correlation Coefficient

TAL Education  CM Hospitalar

Very weak diversification

The 3 months correlation between TAL and VVEO3 is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding TAL Education Group and CM Hospitalar SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CM Hospitalar SA 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 CM Hospitalar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CM Hospitalar SA has no effect on the direction of TAL Education i.e., TAL Education and CM Hospitalar go up and down completely randomly.

Pair Corralation between TAL Education and CM Hospitalar

Assuming the 90 days trading horizon TAL Education Group is expected to generate 1.19 times more return on investment than CM Hospitalar. However, TAL Education is 1.19 times more volatile than CM Hospitalar SA. It trades about 0.02 of its potential returns per unit of risk. CM Hospitalar SA is currently generating about -0.02 per unit of risk. If you would invest  611.00  in TAL Education Group on April 21, 2025 and sell it today you would lose (1.00) from holding TAL Education Group or give up 0.16% of portfolio value over 90 days.

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

TAL Education Group  vs.  CM Hospitalar SA

TAL Education Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TAL Education Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, TAL Education is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

CM Hospitalar SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days CM Hospitalar SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CM Hospitalar is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with TAL Education and CM Hospitalar

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

The idea behind TAL Education Group and CM Hospitalar SA 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 Transaction History module to view history of all your transactions and understand their impact on performance.