Correlation Between Extra Space and New Oriental
Can any of the company-specific risk be diversified away by investing in both Extra Space and New Oriental 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 Extra Space and New Oriental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Extra Space Storage and New Oriental Education, you can compare the effects of market volatilities on Extra Space and New Oriental 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 Extra Space with a short position of New Oriental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extra Space and New Oriental.
Diversification Opportunities for Extra Space and New Oriental
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Extra and New is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and New Oriental Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Oriental Education and Extra Space 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 Extra Space Storage are associated (or correlated) with New Oriental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Oriental Education has no effect on the direction of Extra Space i.e., Extra Space and New Oriental go up and down completely randomly.
Pair Corralation between Extra Space and New Oriental
Assuming the 90 days trading horizon Extra Space Storage is expected to under-perform the New Oriental. But the stock apears to be less risky and, when comparing its historical volatility, Extra Space Storage is 1.91 times less risky than New Oriental. The stock trades about -0.13 of its potential returns per unit of risk. The New Oriental Education is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 2,412 in New Oriental Education on November 1, 2024 and sell it today you would lose (424.00) from holding New Oriental Education or give up 17.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Extra Space Storage vs. New Oriental Education
Performance |
| Timeline |
| Extra Space Storage |
| New Oriental Education |
Extra Space and New Oriental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extra Space and New Oriental
The main advantage of trading using opposite Extra Space and New Oriental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extra Space position performs unexpectedly, New Oriental 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 New Oriental will offset losses from the drop in New Oriental's long position.| Extra Space vs. Clover Health Investments, | Extra Space vs. G2D Investments | Extra Space vs. Martin Marietta Materials, | Extra Space vs. Academy Sports and |
| New Oriental vs. GAEC Educacao SA | New Oriental vs. Yduqs Participaes SA | New Oriental vs. Ser Educacional Sa | New Oriental vs. MPM Corpreos 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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