Correlation Between TAL Education and New Oriental
Can any of the company-specific risk be diversified away by investing in both TAL Education 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 TAL Education and New Oriental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TAL Education Group and New Oriental Education, you can compare the effects of market volatilities on TAL Education 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 TAL Education with a short position of New Oriental. Check out your portfolio center. Please also check ongoing floating volatility patterns of TAL Education and New Oriental.
Diversification Opportunities for TAL Education and New Oriental
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between TAL and New is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding TAL Education Group 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 TAL Education 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 TAL Education Group 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 TAL Education i.e., TAL Education and New Oriental go up and down completely randomly.
Pair Corralation between TAL Education and New Oriental
Considering the 90-day investment horizon TAL Education Group is expected to under-perform the New Oriental. In addition to that, TAL Education is 1.61 times more volatile than New Oriental Education. It trades about -0.08 of its total potential returns per unit of risk. New Oriental Education is currently generating about -0.13 per unit of volatility. If you would invest 6,299 in New Oriental Education on August 31, 2024 and sell it today you would lose (347.00) from holding New Oriental Education or give up 5.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
TAL Education Group vs. New Oriental Education
Performance |
| Timeline |
| TAL Education Group |
| New Oriental Education |
TAL Education and New Oriental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TAL Education and New Oriental
The main advantage of trading using opposite TAL Education and New Oriental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TAL Education 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.| TAL Education vs. Gaotu Techedu DRC | TAL Education vs. 17 Education Technology | TAL Education vs. Chegg Inc | TAL Education vs. Youdao Inc |
| New Oriental vs. Gaotu Techedu DRC | New Oriental vs. 17 Education Technology | New Oriental vs. Chegg Inc | New Oriental vs. Elite Education Group |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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