Correlation Between TAL Education and Tarena International

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

Diversification Opportunities for TAL Education and Tarena International

0.05

Correlation Coefficient

TAL Education  Tarena International

Significant diversification

The 3 months correlation between TAL and Tarena is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding TAL Education Group and Tarena International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tarena International 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 Tarena International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tarena International has no effect on the direction of TAL Education i.e., TAL Education and Tarena International go up and down completely randomly.

Pair Corralation between TAL Education and Tarena International

Considering the 90-day investment horizon TAL Education Group is expected to under-perform the Tarena International. But the stock apears to be less risky and, when comparing its historical volatility, TAL Education Group is 1.3 times less risky than Tarena International. The stock trades about -0.26 of its potential returns per unit of risk. The Tarena International is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest  40.00  in Tarena International on January 27, 2025 and sell it today you would earn a total of  10.00  from holding Tarena International or generate 25.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	33.33%
Values	Daily Returns

TAL Education Group  vs.  Tarena International

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. Despite uncertain performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in May 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Tarena International

Risk-Adjusted Performance

OK

Over the last 90 days Tarena International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very weak basic indicators, Tarena International displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TAL Education and Tarena International

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

The idea behind TAL Education Group and Tarena International 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..