Correlation Between United States and New Oriental
Can any of the company-specific risk be diversified away by investing in both United States 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 United States and New Oriental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and New Oriental Education, you can compare the effects of market volatilities on United States 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 United States with a short position of New Oriental. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and New Oriental.
Diversification Opportunities for United States and New Oriental
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between United and New is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel 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 United States 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 United States Steel 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 United States i.e., United States and New Oriental go up and down completely randomly.
Pair Corralation between United States and New Oriental
Given the investment horizon of 90 days United States Steel is expected to generate 16.01 times more return on investment than New Oriental. However, United States is 16.01 times more volatile than New Oriental Education. It trades about 0.12 of its potential returns per unit of risk. New Oriental Education is currently generating about -0.03 per unit of risk. If you would invest 76,568 in United States Steel on August 29, 2024 and sell it today you would earn a total of 6,257 from holding United States Steel or generate 8.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States Steel vs. New Oriental Education
Performance |
| Timeline |
| United States Steel |
| New Oriental Education |
United States and New Oriental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and New Oriental
The main advantage of trading using opposite United States and New Oriental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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.| United States vs. The Select Sector | United States vs. Promotora y Operadora | United States vs. iShares Global Timber | United States vs. SPDR Series Trust |
| New Oriental vs. GMxico Transportes SAB | New Oriental vs. FIBRA Storage | New Oriental vs. United States Steel | New Oriental vs. First Republic Bank |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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