Correlation Between New Oriental and IPC MEXICO
Can any of the company-specific risk be diversified away by investing in both New Oriental and IPC MEXICO 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 IPC MEXICO 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 IPC MEXICO, you can compare the effects of market volatilities on New Oriental and IPC MEXICO 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 IPC MEXICO. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Oriental and IPC MEXICO.
Diversification Opportunities for New Oriental and IPC MEXICO
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between New and IPC is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding New Oriental Education and IPC MEXICO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPC MEXICO 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 IPC MEXICO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IPC MEXICO has no effect on the direction of New Oriental i.e., New Oriental and IPC MEXICO go up and down completely randomly.
Pair Corralation between New Oriental and IPC MEXICO
Assuming the 90 days trading horizon New Oriental Education is expected to generate 0.21 times more return on investment than IPC MEXICO. However, New Oriental Education is 4.78 times less risky than IPC MEXICO. It trades about -0.3 of its potential returns per unit of risk. IPC MEXICO is currently generating about -0.12 per unit of risk. If you would invest 127,800 in New Oriental Education on August 30, 2024 and sell it today you would lose (1,200) from holding New Oriental Education or give up 0.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 91.3% |
| Values | Daily Returns |
New Oriental Education vs. IPC MEXICO
Performance |
| Timeline |
New Oriental and IPC MEXICO Volatility Contrast
Predicted Return Density |
| Returns |
New Oriental Education
Pair trading matchups for New Oriental
IPC MEXICO
Pair trading matchups for IPC MEXICO
Pair Trading with New Oriental and IPC MEXICO
The main advantage of trading using opposite New Oriental and IPC MEXICO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Oriental position performs unexpectedly, IPC MEXICO 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 IPC MEXICO will offset losses from the drop in IPC MEXICO's long position.| New Oriental vs. The Select Sector | New Oriental vs. SPDR Series Trust | New Oriental vs. FibroGen | New Oriental vs. iShares Trust |
| IPC MEXICO vs. Ameriprise Financial | IPC MEXICO vs. DXC Technology | IPC MEXICO vs. Southwest Airlines | IPC MEXICO vs. McEwen Mining |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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