Correlation Between New Oriental and Installed Building
Can any of the company-specific risk be diversified away by investing in both New Oriental and Installed Building 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 Installed Building 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 Installed Building Products, you can compare the effects of market volatilities on New Oriental and Installed Building 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 Installed Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Oriental and Installed Building.
Diversification Opportunities for New Oriental and Installed Building
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between New and Installed is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding New Oriental Education and Installed Building Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Installed Building 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 Installed Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Installed Building has no effect on the direction of New Oriental i.e., New Oriental and Installed Building go up and down completely randomly.
Pair Corralation between New Oriental and Installed Building
Considering the 90-day investment horizon New Oriental Education is expected to under-perform the Installed Building. But the stock apears to be less risky and, when comparing its historical volatility, New Oriental Education is 1.81 times less risky than Installed Building. The stock trades about -0.21 of its potential returns per unit of risk. The Installed Building Products is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 23,471 in Installed Building Products on August 28, 2024 and sell it today you would earn a total of 105.00 from holding Installed Building Products or generate 0.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Oriental Education vs. Installed Building Products
Performance |
| Timeline |
| New Oriental Education |
| Installed Building |
New Oriental and Installed Building Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Oriental and Installed Building
The main advantage of trading using opposite New Oriental and Installed Building positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Oriental position performs unexpectedly, Installed Building 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 Installed Building will offset losses from the drop in Installed Building's long position.| New Oriental vs. Gaotu Techedu DRC | New Oriental vs. 17 Education Technology | New Oriental vs. Chegg Inc | New Oriental vs. Elite Education Group |
| Installed Building vs. Century Communities | Installed Building vs. MI Homes | Installed Building vs. Taylor Morn Home | Installed Building vs. TRI Pointe Homes |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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