Correlation Between Costco Wholesale and New Oriental
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale 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 Costco Wholesale and New Oriental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Costco Wholesale and New Oriental Education, you can compare the effects of market volatilities on Costco Wholesale 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 Costco Wholesale with a short position of New Oriental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and New Oriental.
Diversification Opportunities for Costco Wholesale and New Oriental
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Costco and New is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale 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 Costco Wholesale 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 Costco Wholesale 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 Costco Wholesale i.e., Costco Wholesale and New Oriental go up and down completely randomly.
Pair Corralation between Costco Wholesale and New Oriental
Assuming the 90 days trading horizon Costco Wholesale is expected to generate 12.65 times more return on investment than New Oriental. However, Costco Wholesale is 12.65 times more volatile than New Oriental Education. It trades about 0.26 of its potential returns per unit of risk. New Oriental Education is currently generating about -0.3 per unit of risk. If you would invest 1,782,737 in Costco Wholesale on August 30, 2024 and sell it today you would earn a total of 197,763 from holding Costco Wholesale or generate 11.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Costco Wholesale vs. New Oriental Education
Performance |
| Timeline |
| Costco Wholesale |
| New Oriental Education |
Costco Wholesale and New Oriental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and New Oriental
The main advantage of trading using opposite Costco Wholesale and New Oriental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale 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.| Costco Wholesale vs. United Airlines Holdings | Costco Wholesale vs. Grupo Hotelero Santa | Costco Wholesale vs. Capital One Financial | Costco Wholesale vs. Hoteles City Express |
| New Oriental vs. The Select Sector | New Oriental vs. SPDR Series Trust | New Oriental vs. FibroGen | New Oriental vs. iShares Trust |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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