Correlation Between New Oriental and NVIDIA
Can any of the company-specific risk be diversified away by investing in both New Oriental and NVIDIA 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 NVIDIA 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 NVIDIA, you can compare the effects of market volatilities on New Oriental and NVIDIA 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 NVIDIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Oriental and NVIDIA.
Diversification Opportunities for New Oriental and NVIDIA
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between New and NVIDIA is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding New Oriental Education and NVIDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA 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 NVIDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVIDIA has no effect on the direction of New Oriental i.e., New Oriental and NVIDIA go up and down completely randomly.
Pair Corralation between New Oriental and NVIDIA
Assuming the 90 days trading horizon New Oriental is expected to generate 6.75 times less return on investment than NVIDIA. But when comparing it to its historical volatility, New Oriental Education is 1.25 times less risky than NVIDIA. It trades about 0.03 of its potential returns per unit of risk. NVIDIA is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 82,252 in NVIDIA on September 4, 2024 and sell it today you would earn a total of 199,780 from holding NVIDIA or generate 242.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.65% |
| Values | Daily Returns |
New Oriental Education vs. NVIDIA
Performance |
| Timeline |
| New Oriental Education |
| NVIDIA |
New Oriental and NVIDIA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Oriental and NVIDIA
The main advantage of trading using opposite New Oriental and NVIDIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Oriental position performs unexpectedly, NVIDIA 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 NVIDIA will offset losses from the drop in NVIDIA's long position.| New Oriental vs. The Select Sector | New Oriental vs. Promotora y Operadora | New Oriental vs. SPDR Series Trust | New Oriental vs. Vanguard World |
| NVIDIA vs. FibraHotel | NVIDIA vs. Grupo Sports World | NVIDIA vs. CVS Health | NVIDIA vs. Cognizant Technology Solutions |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
Other Complementary Tools
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas |