Correlation Between New Oriental and Glencore Plc
Can any of the company-specific risk be diversified away by investing in both New Oriental and Glencore Plc 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 Glencore Plc 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 Glencore plc, you can compare the effects of market volatilities on New Oriental and Glencore Plc 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 Glencore Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Oriental and Glencore Plc.
Diversification Opportunities for New Oriental and Glencore Plc
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between New and Glencore is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding New Oriental Education and Glencore plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glencore plc 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 Glencore Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glencore plc has no effect on the direction of New Oriental i.e., New Oriental and Glencore Plc go up and down completely randomly.
Pair Corralation between New Oriental and Glencore Plc
Assuming the 90 days trading horizon New Oriental Education is expected to generate 20.21 times more return on investment than Glencore Plc. However, New Oriental is 20.21 times more volatile than Glencore plc. It trades about 0.01 of its potential returns per unit of risk. Glencore plc is currently generating about 0.09 per unit of risk. If you would invest 126,859 in New Oriental Education on September 2, 2024 and sell it today you would lose (259.00) from holding New Oriental Education or give up 0.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Oriental Education vs. Glencore plc
Performance |
| Timeline |
| New Oriental Education |
| Glencore plc |
New Oriental and Glencore Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Oriental and Glencore Plc
The main advantage of trading using opposite New Oriental and Glencore Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Oriental position performs unexpectedly, Glencore Plc 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 Glencore Plc will offset losses from the drop in Glencore Plc's long position.| New Oriental vs. Grupo Sports World | New Oriental vs. GMxico Transportes SAB | New Oriental vs. Hoteles City Express | New Oriental vs. UnitedHealth Group Incorporated |
| Glencore Plc vs. Rio Tinto Group | Glencore Plc vs. Vale SA | Glencore Plc vs. Minera Frisco SAB | Glencore Plc vs. Compaa Minera Autln |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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