Correlation Between New Oriental and Starbucks
Can any of the company-specific risk be diversified away by investing in both New Oriental and Starbucks 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 Starbucks 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 Starbucks, you can compare the effects of market volatilities on New Oriental and Starbucks 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 Starbucks. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Oriental and Starbucks.
Diversification Opportunities for New Oriental and Starbucks
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between New and Starbucks is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding New Oriental Education and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks 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 Starbucks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starbucks has no effect on the direction of New Oriental i.e., New Oriental and Starbucks go up and down completely randomly.
Pair Corralation between New Oriental and Starbucks
If you would invest 193,719 in Starbucks on September 3, 2024 and sell it today you would earn a total of 14,781 from holding Starbucks or generate 7.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
New Oriental Education vs. Starbucks
Performance |
| Timeline |
| New Oriental Education |
| Starbucks |
New Oriental and Starbucks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Oriental and Starbucks
The main advantage of trading using opposite New Oriental and Starbucks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Oriental position performs unexpectedly, Starbucks 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 Starbucks will offset losses from the drop in Starbucks' 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 |
| Starbucks vs. Monster Beverage Corp | Starbucks vs. McEwen Mining | Starbucks vs. Grupo Sports World | Starbucks vs. Verizon Communications |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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