Correlation Between Best Buy and New Oriental
Can any of the company-specific risk be diversified away by investing in both Best Buy 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 Best Buy and New Oriental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Best Buy Co and New Oriental Education, you can compare the effects of market volatilities on Best Buy 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 Best Buy with a short position of New Oriental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Best Buy and New Oriental.
Diversification Opportunities for Best Buy and New Oriental
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Best and New is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Best Buy Co 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 Best Buy 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 Best Buy Co 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 Best Buy i.e., Best Buy and New Oriental go up and down completely randomly.
Pair Corralation between Best Buy and New Oriental
Assuming the 90 days trading horizon Best Buy Co is expected to generate 0.56 times more return on investment than New Oriental. However, Best Buy Co is 1.79 times less risky than New Oriental. It trades about -0.16 of its potential returns per unit of risk. New Oriental Education is currently generating about -0.12 per unit of risk. If you would invest 53,477 in Best Buy Co on August 31, 2024 and sell it today you would lose (2,777) from holding Best Buy Co or give up 5.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Best Buy Co vs. New Oriental Education
Performance |
| Timeline |
| Best Buy |
| New Oriental Education |
Best Buy and New Oriental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Best Buy and New Oriental
The main advantage of trading using opposite Best Buy and New Oriental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Best Buy 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.| Best Buy vs. Warner Music Group | Best Buy vs. American Airlines Group | Best Buy vs. New Oriental Education | Best Buy vs. Tyson Foods |
| New Oriental vs. TAL Education Group | New Oriental vs. Fras le SA | New Oriental vs. Energisa SA | New Oriental vs. Clave Indices De |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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