Correlation Between New Oriental and Ross Stores
Can any of the company-specific risk be diversified away by investing in both New Oriental and Ross Stores 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 Ross Stores 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 Ross Stores, you can compare the effects of market volatilities on New Oriental and Ross Stores 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 Ross Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Oriental and Ross Stores.
Diversification Opportunities for New Oriental and Ross Stores
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between New and Ross is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding New Oriental Education and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores 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 Ross Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ross Stores has no effect on the direction of New Oriental i.e., New Oriental and Ross Stores go up and down completely randomly.
Pair Corralation between New Oriental and Ross Stores
Assuming the 90 days trading horizon New Oriental Education is expected to under-perform the Ross Stores. In addition to that, New Oriental is 1.35 times more volatile than Ross Stores. It trades about -0.01 of its total potential returns per unit of risk. Ross Stores is currently generating about 0.36 per unit of volatility. If you would invest 40,221 in Ross Stores on August 30, 2024 and sell it today you would earn a total of 5,589 from holding Ross Stores or generate 13.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Oriental Education vs. Ross Stores
Performance |
| Timeline |
| New Oriental Education |
| Ross Stores |
New Oriental and Ross Stores Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Oriental and Ross Stores
The main advantage of trading using opposite New Oriental and Ross Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Oriental position performs unexpectedly, Ross Stores 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 Ross Stores will offset losses from the drop in Ross Stores' 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 |
| Ross Stores vs. Monster Beverage | Ross Stores vs. Mitsubishi UFJ Financial | Ross Stores vs. Tyson Foods | Ross Stores vs. Sumitomo Mitsui Financial |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum |