Correlation Between New Oriental and Extra Space
Can any of the company-specific risk be diversified away by investing in both New Oriental and Extra Space 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 Extra Space 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 Extra Space Storage, you can compare the effects of market volatilities on New Oriental and Extra Space 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 Extra Space. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Oriental and Extra Space.
Diversification Opportunities for New Oriental and Extra Space
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between New and Extra is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding New Oriental Education and Extra Space Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extra Space Storage 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 Extra Space. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extra Space Storage has no effect on the direction of New Oriental i.e., New Oriental and Extra Space go up and down completely randomly.
Pair Corralation between New Oriental and Extra Space
Assuming the 90 days trading horizon New Oriental Education is expected to under-perform the Extra Space. But the stock apears to be less risky and, when comparing its historical volatility, New Oriental Education is 1.05 times less risky than Extra Space. The stock trades about -0.08 of its potential returns per unit of risk. The Extra Space Storage is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 24,000 in Extra Space Storage on September 1, 2024 and sell it today you would earn a total of 2,097 from holding Extra Space Storage or generate 8.74% 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. Extra Space Storage
Performance |
| Timeline |
| New Oriental Education |
| Extra Space Storage |
New Oriental and Extra Space Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Oriental and Extra Space
The main advantage of trading using opposite New Oriental and Extra Space positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Oriental position performs unexpectedly, Extra Space 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 Extra Space will offset losses from the drop in Extra Space's long position.| New Oriental vs. Hospital Mater Dei | New Oriental vs. Taiwan Semiconductor Manufacturing | New Oriental vs. Global X Funds | New Oriental vs. GP Investments |
| Extra Space vs. BTG Pactual Logstica | Extra Space vs. Fras le SA | Extra Space vs. Western Digital | Extra Space vs. Energisa 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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