Correlation Between New Oriental and Basic Materials
Can any of the company-specific risk be diversified away by investing in both New Oriental and Basic Materials 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 Basic Materials 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 Basic Materials, you can compare the effects of market volatilities on New Oriental and Basic Materials 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 Basic Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Oriental and Basic Materials.
Diversification Opportunities for New Oriental and Basic Materials
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between New and Basic is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding New Oriental Education and Basic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basic Materials 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 Basic Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basic Materials has no effect on the direction of New Oriental i.e., New Oriental and Basic Materials go up and down completely randomly.
Pair Corralation between New Oriental and Basic Materials
Assuming the 90 days trading horizon New Oriental Education is expected to under-perform the Basic Materials. In addition to that, New Oriental is 4.36 times more volatile than Basic Materials. It trades about -0.22 of its total potential returns per unit of risk. Basic Materials is currently generating about 0.0 per unit of volatility. If you would invest 539,564 in Basic Materials on November 8, 2024 and sell it today you would lose (658.00) from holding Basic Materials or give up 0.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Oriental Education vs. Basic Materials
Performance |
| Timeline |
New Oriental and Basic Materials Volatility Contrast
Predicted Return Density |
| Returns |
New Oriental Education
Pair trading matchups for New Oriental
Basic Materials
Pair trading matchups for Basic Materials
Pair Trading with New Oriental and Basic Materials
The main advantage of trading using opposite New Oriental and Basic Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Oriental position performs unexpectedly, Basic Materials 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 Basic Materials will offset losses from the drop in Basic Materials' long position.| New Oriental vs. Jefferies Financial Group | New Oriental vs. salesforce inc | New Oriental vs. METISA Metalrgica Timboense | New Oriental vs. Lloyds Banking Group |
| Basic Materials vs. HDFC Bank Limited | Basic Materials vs. Datadog, | Basic Materials vs. Discover Financial Services | Basic Materials vs. PENN Entertainment, |
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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