Correlation Between Wah Fu and New Oriental
Can any of the company-specific risk be diversified away by investing in both Wah Fu 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 Wah Fu and New Oriental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wah Fu Education and New Oriental Education, you can compare the effects of market volatilities on Wah Fu 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 Wah Fu with a short position of New Oriental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wah Fu and New Oriental.
Diversification Opportunities for Wah Fu and New Oriental
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wah and New is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Wah Fu Education 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 Wah Fu 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 Wah Fu Education 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 Wah Fu i.e., Wah Fu and New Oriental go up and down completely randomly.
Pair Corralation between Wah Fu and New Oriental
Given the investment horizon of 90 days Wah Fu Education is expected to under-perform the New Oriental. In addition to that, Wah Fu is 1.51 times more volatile than New Oriental Education. It trades about -0.25 of its total potential returns per unit of risk. New Oriental Education is currently generating about -0.29 per unit of volatility. If you would invest 6,418 in New Oriental Education on August 27, 2024 and sell it today you would lose (682.00) from holding New Oriental Education or give up 10.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wah Fu Education vs. New Oriental Education
Performance |
| Timeline |
| Wah Fu Education |
| New Oriental Education |
Wah Fu and New Oriental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wah Fu and New Oriental
The main advantage of trading using opposite Wah Fu and New Oriental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wah Fu 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.| Wah Fu vs. Four Seasons Education | Wah Fu vs. Sunlands Technology Group | Wah Fu vs. 51Talk Online Education | Wah Fu vs. Golden Sun 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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