Correlation Between New Oriental and Lixiang Education
Can any of the company-specific risk be diversified away by investing in both New Oriental and Lixiang Education 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 Lixiang Education 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 Lixiang Education Holding, you can compare the effects of market volatilities on New Oriental and Lixiang Education 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 Lixiang Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Oriental and Lixiang Education.
Diversification Opportunities for New Oriental and Lixiang Education
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between New and Lixiang is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding New Oriental Education and Lixiang Education Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lixiang Education Holding 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 Lixiang Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lixiang Education Holding has no effect on the direction of New Oriental i.e., New Oriental and Lixiang Education go up and down completely randomly.
Pair Corralation between New Oriental and Lixiang Education
Considering the 90-day investment horizon New Oriental is expected to generate 1.49 times less return on investment than Lixiang Education. But when comparing it to its historical volatility, New Oriental Education is 3.25 times less risky than Lixiang Education. It trades about 0.04 of its potential returns per unit of risk. Lixiang Education Holding is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,370 in Lixiang Education Holding on August 31, 2024 and sell it today you would lose (1,119) from holding Lixiang Education Holding or give up 81.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Oriental Education vs. Lixiang Education Holding
Performance |
| Timeline |
| New Oriental Education |
| Lixiang Education Holding |
New Oriental and Lixiang Education Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Oriental and Lixiang Education
The main advantage of trading using opposite New Oriental and Lixiang Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Oriental position performs unexpectedly, Lixiang Education 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 Lixiang Education will offset losses from the drop in Lixiang Education'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 |
| Lixiang Education vs. China Liberal Education | Lixiang Education vs. Four Seasons Education | Lixiang Education vs. Jianzhi Education Technology | Lixiang Education vs. Elite Education Group |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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