Correlation Between Ross Stores and New Oriental
Can any of the company-specific risk be diversified away by investing in both Ross Stores 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 Ross Stores and New Oriental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ross Stores and New Oriental Education, you can compare the effects of market volatilities on Ross Stores 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 Ross Stores with a short position of New Oriental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ross Stores and New Oriental.
Diversification Opportunities for Ross Stores and New Oriental
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ross and New is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores 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 Ross Stores 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 Ross Stores 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 Ross Stores i.e., Ross Stores and New Oriental go up and down completely randomly.
Pair Corralation between Ross Stores and New Oriental
Assuming the 90 days trading horizon Ross Stores is expected to generate 16.92 times more return on investment than New Oriental. However, Ross Stores is 16.92 times more volatile than New Oriental Education. It trades about 0.45 of its potential returns per unit of risk. New Oriental Education is currently generating about -0.3 per unit of risk. If you would invest 286,000 in Ross Stores on August 30, 2024 and sell it today you would earn a total of 26,485 from holding Ross Stores or generate 9.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 38.1% |
| Values | Daily Returns |
Ross Stores vs. New Oriental Education
Performance |
| Timeline |
| Ross Stores |
| New Oriental Education |
Ross Stores and New Oriental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ross Stores and New Oriental
The main advantage of trading using opposite Ross Stores and New Oriental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ross Stores 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.| Ross Stores vs. Intel | Ross Stores vs. The Walt Disney | Ross Stores vs. Bristol Myers Squibb | Ross Stores vs. Southwest Airlines |
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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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