Correlation Between Amazon and New Oriental
Can any of the company-specific risk be diversified away by investing in both Amazon and New Oriental 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 Amazon and New Oriental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and New Oriental Education, you can compare the effects of market volatilities on Amazon and New Oriental 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 Amazon with a short position of New Oriental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and New Oriental.
Diversification Opportunities for Amazon and New Oriental
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Amazon and New is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and New Oriental Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Oriental Education and Amazon 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 Amazon Inc are associated (or correlated) with New Oriental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Oriental Education has no effect on the direction of Amazon i.e., Amazon and New Oriental go up and down completely randomly.
Pair Corralation between Amazon and New Oriental
Assuming the 90 days trading horizon Amazon Inc is expected to generate 0.76 times more return on investment than New Oriental. However, Amazon Inc is 1.32 times less risky than New Oriental. It trades about 0.11 of its potential returns per unit of risk. New Oriental Education is currently generating about -0.01 per unit of risk. If you would invest 361,839 in Amazon Inc on September 27, 2024 and sell it today you would earn a total of 98,861 from holding Amazon Inc or generate 27.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. New Oriental Education
Performance |
| Timeline |
| Amazon Inc |
| New Oriental Education |
Amazon and New Oriental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and New Oriental
The main advantage of trading using opposite Amazon and New Oriental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, New Oriental 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 New Oriental will offset losses from the drop in New Oriental's long position.The idea behind Amazon Inc and New Oriental Education 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.| New Oriental vs. Cognizant Technology Solutions | New Oriental vs. CVS Health | New Oriental vs. Micron Technology | New Oriental vs. First Republic Bank |
Check out your portfolio center.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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
Other Complementary Tools
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Bonds Directory Find actively traded corporate debentures issued by US companies |