Correlation Between New Oriental and GP Investments
Can any of the company-specific risk be diversified away by investing in both New Oriental and GP Investments 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 GP Investments 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 GP Investments, you can compare the effects of market volatilities on New Oriental and GP Investments 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 GP Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Oriental and GP Investments.
Diversification Opportunities for New Oriental and GP Investments
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between New and GPIV33 is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding New Oriental Education and GP Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GP Investments 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 GP Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GP Investments has no effect on the direction of New Oriental i.e., New Oriental and GP Investments go up and down completely randomly.
Pair Corralation between New Oriental and GP Investments
Assuming the 90 days trading horizon New Oriental Education is expected to generate 1.16 times more return on investment than GP Investments. However, New Oriental is 1.16 times more volatile than GP Investments. It trades about 0.06 of its potential returns per unit of risk. GP Investments is currently generating about 0.04 per unit of risk. If you would invest 1,184 in New Oriental Education on August 30, 2024 and sell it today you would earn a total of 1,184 from holding New Oriental Education or generate 100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.0% |
| Values | Daily Returns |
New Oriental Education vs. GP Investments
Performance |
| Timeline |
| New Oriental Education |
| GP Investments |
New Oriental and GP Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Oriental and GP Investments
The main advantage of trading using opposite New Oriental and GP Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Oriental position performs unexpectedly, GP Investments 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 GP Investments will offset losses from the drop in GP Investments' long position.| New Oriental vs. Cogna Educao SA | New Oriental vs. Yduqs Participaes SA | New Oriental vs. GAEC Educacao SA | New Oriental vs. Ser Educacional Sa |
| GP Investments vs. Global X Funds | GP Investments vs. American Airlines Group | GP Investments vs. Southwest Airlines Co | GP Investments vs. Unity Software |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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