Correlation Between BHP and New Oriental
Can any of the company-specific risk be diversified away by investing in both BHP 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 BHP and New Oriental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BHP Group and New Oriental Education, you can compare the effects of market volatilities on BHP 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 BHP with a short position of New Oriental. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP and New Oriental.
Diversification Opportunities for BHP and New Oriental
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between BHP and New is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group 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 BHP 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 BHP Group 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 BHP i.e., BHP and New Oriental go up and down completely randomly.
Pair Corralation between BHP and New Oriental
If you would invest 126,600 in New Oriental Education on September 4, 2024 and sell it today you would earn a total of 0.00 from holding New Oriental Education or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHP Group vs. New Oriental Education
Performance |
| Timeline |
| BHP Group |
| New Oriental Education |
BHP and New Oriental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP and New Oriental
The main advantage of trading using opposite BHP and New Oriental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP 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.| BHP vs. Verizon Communications | BHP vs. New Oriental Education | BHP vs. Grupo Carso SAB | BHP vs. Costco Wholesale |
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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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