Correlation Between TCTM Kids and TAL Education

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

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

Diversification Opportunities for TCTM Kids and TAL Education

0.58

Correlation Coefficient

TCTM Kids  TAL Education

Very weak diversification

The 3 months correlation between TCTM and TAL is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding TCTM Kids IT and TAL Education Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TAL Education Group and TCTM Kids 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 TCTM Kids IT are associated (or correlated) with TAL Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TAL Education Group has no effect on the direction of TCTM Kids i.e., TCTM Kids and TAL Education go up and down completely randomly.

Pair Corralation between TCTM Kids and TAL Education

Considering the 90-day investment horizon TCTM Kids IT is expected to generate 2.99 times more return on investment than TAL Education. However, TCTM Kids is 2.99 times more volatile than TAL Education Group. It trades about 0.31 of its potential returns per unit of risk. TAL Education Group is currently generating about 0.1 per unit of risk. If you would invest  49.00  in TCTM Kids IT on April 25, 2025 and sell it today you would earn a total of  118.00  from holding TCTM Kids IT or generate 240.82% return on investment over 90 days.

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

TCTM Kids IT  vs.  TAL Education Group

TCTM Kids IT

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TCTM Kids IT are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, TCTM Kids sustained solid returns over the last few months and may actually be approaching a breakup point.

TAL Education Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TAL Education Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, TAL Education disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TCTM Kids and TAL Education

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

The idea behind TCTM Kids IT and TAL Education Group 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.