Correlation Between New Oriental and Devon Energy
Can any of the company-specific risk be diversified away by investing in both New Oriental and Devon Energy 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 Devon Energy 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 Devon Energy, you can compare the effects of market volatilities on New Oriental and Devon Energy 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 Devon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Oriental and Devon Energy.
Diversification Opportunities for New Oriental and Devon Energy
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between New and Devon is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding New Oriental Education and Devon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Devon Energy 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 Devon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Devon Energy has no effect on the direction of New Oriental i.e., New Oriental and Devon Energy go up and down completely randomly.
Pair Corralation between New Oriental and Devon Energy
Assuming the 90 days trading horizon New Oriental Education is expected to under-perform the Devon Energy. In addition to that, New Oriental is 1.67 times more volatile than Devon Energy. It trades about -0.1 of its total potential returns per unit of risk. Devon Energy is currently generating about 0.07 per unit of volatility. If you would invest 21,294 in Devon Energy on August 30, 2024 and sell it today you would earn a total of 1,058 from holding Devon Energy or generate 4.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Oriental Education vs. Devon Energy
Performance |
| Timeline |
| New Oriental Education |
| Devon Energy |
New Oriental and Devon Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Oriental and Devon Energy
The main advantage of trading using opposite New Oriental and Devon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Oriental position performs unexpectedly, Devon Energy 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 Devon Energy will offset losses from the drop in Devon Energy's long position.| New Oriental vs. Prudential Financial | New Oriental vs. United Airlines Holdings | New Oriental vs. British American Tobacco | New Oriental vs. Southwest Airlines Co |
| Devon Energy vs. Petro Rio SA | Devon Energy vs. Banco BTG Pactual | Devon Energy vs. Ambipar Participaes e | Devon Energy vs. Mliuz SA |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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