Correlation Between New Oriental and Best Buy
Can any of the company-specific risk be diversified away by investing in both New Oriental and Best Buy 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 New Oriental and Best Buy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Oriental Education and Best Buy Co, you can compare the effects of market volatilities on New Oriental and Best Buy 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 New Oriental with a short position of Best Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Oriental and Best Buy.
Diversification Opportunities for New Oriental and Best Buy
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between New and Best is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding New Oriental Education and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy and New Oriental 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 New Oriental Education are associated (or correlated) with Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of New Oriental i.e., New Oriental and Best Buy go up and down completely randomly.
Pair Corralation between New Oriental and Best Buy
Assuming the 90 days trading horizon New Oriental Education is expected to generate 2.31 times more return on investment than Best Buy. However, New Oriental is 2.31 times more volatile than Best Buy Co. It trades about 0.02 of its potential returns per unit of risk. Best Buy Co is currently generating about -0.02 per unit of risk. If you would invest 2,299 in New Oriental Education on September 2, 2024 and sell it today you would earn a total of 4.00 from holding New Oriental Education or generate 0.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 96.88% |
| Values | Daily Returns |
New Oriental Education vs. Best Buy Co
Performance |
| Timeline |
| New Oriental Education |
| Best Buy |
New Oriental and Best Buy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Oriental and Best Buy
The main advantage of trading using opposite New Oriental and Best Buy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Oriental position performs unexpectedly, Best Buy 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 Best Buy will offset losses from the drop in Best Buy's long position.| New Oriental vs. Fras le SA | New Oriental vs. Energisa SA | New Oriental vs. Clave Indices De | New Oriental vs. BTG Pactual Logstica |
| Best Buy vs. Take Two Interactive Software | Best Buy vs. Cognizant Technology Solutions | Best Buy vs. Livetech da Bahia | Best Buy vs. Brpr Corporate Offices |
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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