Correlation Between New Oriental and Tesla
Can any of the company-specific risk be diversified away by investing in both New Oriental and Tesla 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 Tesla 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 Tesla Inc, you can compare the effects of market volatilities on New Oriental and Tesla 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 Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Oriental and Tesla.
Diversification Opportunities for New Oriental and Tesla
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between New and Tesla is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding New Oriental Education and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc 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 Tesla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesla Inc has no effect on the direction of New Oriental i.e., New Oriental and Tesla go up and down completely randomly.
Pair Corralation between New Oriental and Tesla
Assuming the 90 days trading horizon New Oriental is expected to generate 2.31 times less return on investment than Tesla. But when comparing it to its historical volatility, New Oriental Education is 1.31 times less risky than Tesla. It trades about 0.06 of its potential returns per unit of risk. Tesla Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 214,267 in Tesla Inc on September 26, 2024 and sell it today you would earn a total of 708,808 from holding Tesla Inc or generate 330.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Oriental Education vs. Tesla Inc
Performance |
| Timeline |
| New Oriental Education |
| Tesla Inc |
New Oriental and Tesla Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Oriental and Tesla
The main advantage of trading using opposite New Oriental and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Oriental position performs unexpectedly, Tesla 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 Tesla will offset losses from the drop in Tesla's long position.| New Oriental vs. The Travelers Companies | New Oriental vs. Amazon Inc | New Oriental vs. UTStarcom Holdings Corp | New Oriental vs. Grupo KUO SAB |
| Tesla vs. McEwen Mining | Tesla vs. New Oriental Education | Tesla vs. Grupo Sports World | Tesla vs. Micron Technology |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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