Correlation Between New Oriental and US Bancorp
Can any of the company-specific risk be diversified away by investing in both New Oriental and US Bancorp 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 US Bancorp 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 US Bancorp, you can compare the effects of market volatilities on New Oriental and US Bancorp 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 US Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Oriental and US Bancorp.
Diversification Opportunities for New Oriental and US Bancorp
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between New and USB is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding New Oriental Education and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp 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 US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of New Oriental i.e., New Oriental and US Bancorp go up and down completely randomly.
Pair Corralation between New Oriental and US Bancorp
Assuming the 90 days trading horizon New Oriental is expected to generate 17.91 times less return on investment than US Bancorp. In addition to that, New Oriental is 1.05 times more volatile than US Bancorp. It trades about 0.01 of its total potential returns per unit of risk. US Bancorp is currently generating about 0.12 per unit of volatility. If you would invest 53,514 in US Bancorp on September 2, 2024 and sell it today you would earn a total of 48,036 from holding US Bancorp or generate 89.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Oriental Education vs. US Bancorp
Performance |
| Timeline |
| New Oriental Education |
| US Bancorp |
New Oriental and US Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Oriental and US Bancorp
The main advantage of trading using opposite New Oriental and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Oriental position performs unexpectedly, US Bancorp 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 US Bancorp will offset losses from the drop in US Bancorp'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 |
| US Bancorp vs. Ross Stores | US Bancorp vs. Micron Technology | US Bancorp vs. KB Home | US Bancorp vs. DXC 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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