Correlation Between Universal Technical and New Oriental
Can any of the company-specific risk be diversified away by investing in both Universal Technical 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 Universal Technical and New Oriental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Technical Institute and New Oriental Education, you can compare the effects of market volatilities on Universal Technical 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 Universal Technical with a short position of New Oriental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Technical and New Oriental.
Diversification Opportunities for Universal Technical and New Oriental
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Universal and New is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Universal Technical Institute 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 Universal Technical 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 Universal Technical Institute 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 Universal Technical i.e., Universal Technical and New Oriental go up and down completely randomly.
Pair Corralation between Universal Technical and New Oriental
Considering the 90-day investment horizon Universal Technical Institute is expected to generate 2.25 times more return on investment than New Oriental. However, Universal Technical is 2.25 times more volatile than New Oriental Education. It trades about 0.41 of its potential returns per unit of risk. New Oriental Education is currently generating about -0.11 per unit of risk. If you would invest 1,664 in Universal Technical Institute on August 26, 2024 and sell it today you would earn a total of 874.00 from holding Universal Technical Institute or generate 52.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Technical Institute vs. New Oriental Education
Performance |
| Timeline |
| Universal Technical |
| New Oriental Education |
Universal Technical and New Oriental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Technical and New Oriental
The main advantage of trading using opposite Universal Technical and New Oriental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Technical 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.| Universal Technical vs. Laureate Education | Universal Technical vs. Strategic Education | Universal Technical vs. Grand Canyon Education | Universal Technical vs. American Public Education |
| New Oriental vs. American Public Education | New Oriental vs. Lincoln Educational Services | New Oriental vs. Adtalem Global Education |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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