Correlation Between Fresenius Medical and New Oriental
Can any of the company-specific risk be diversified away by investing in both Fresenius Medical and New Oriental 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 Fresenius Medical and New Oriental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fresenius Medical Care and New Oriental Education, you can compare the effects of market volatilities on Fresenius Medical and New Oriental 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 Fresenius Medical with a short position of New Oriental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fresenius Medical and New Oriental.
Diversification Opportunities for Fresenius Medical and New Oriental
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fresenius and New is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Fresenius Medical Care and New Oriental Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Oriental Education and Fresenius Medical 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 Fresenius Medical Care are associated (or correlated) with New Oriental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Oriental Education has no effect on the direction of Fresenius Medical i.e., Fresenius Medical and New Oriental go up and down completely randomly.
Pair Corralation between Fresenius Medical and New Oriental
Assuming the 90 days trading horizon Fresenius Medical Care is expected to generate 0.62 times more return on investment than New Oriental. However, Fresenius Medical Care is 1.61 times less risky than New Oriental. It trades about 0.11 of its potential returns per unit of risk. New Oriental Education is currently generating about 0.0 per unit of risk. If you would invest 10,675 in Fresenius Medical Care on November 20, 2024 and sell it today you would earn a total of 3,014 from holding Fresenius Medical Care or generate 28.23% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Fresenius Medical Care vs. New Oriental Education
Performance |
Timeline |
Fresenius Medical Care |
New Oriental Education |
Fresenius Medical and New Oriental Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Fresenius Medical and New Oriental
The main advantage of trading using opposite Fresenius Medical and New Oriental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fresenius Medical position performs unexpectedly, New Oriental 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 New Oriental will offset losses from the drop in New Oriental's long position.Fresenius Medical vs. Taiwan Semiconductor Manufacturing | ||
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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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