Correlation Between Select Sector and New Oriental
Can any of the company-specific risk be diversified away by investing in both Select Sector 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 Select Sector and New Oriental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Select Sector and New Oriental Education, you can compare the effects of market volatilities on Select Sector 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 Select Sector with a short position of New Oriental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select Sector and New Oriental.
Diversification Opportunities for Select Sector and New Oriental
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Select and New is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding The Select Sector 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 Select Sector 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 The Select Sector 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 Select Sector i.e., Select Sector and New Oriental go up and down completely randomly.
Pair Corralation between Select Sector and New Oriental
Assuming the 90 days trading horizon The Select Sector is expected to generate 26.63 times more return on investment than New Oriental. However, Select Sector is 26.63 times more volatile than New Oriental Education. It trades about 0.17 of its potential returns per unit of risk. New Oriental Education is currently generating about -0.22 per unit of risk. If you would invest 160,500 in The Select Sector on September 1, 2024 and sell it today you would earn a total of 10,100 from holding The Select Sector or generate 6.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Select Sector vs. New Oriental Education
Performance |
| Timeline |
| Select Sector |
| New Oriental Education |
Select Sector and New Oriental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Select Sector and New Oriental
The main advantage of trading using opposite Select Sector and New Oriental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select Sector 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.| Select Sector vs. The Select Sector | Select Sector vs. The Select Sector | Select Sector vs. The Select Sector | Select Sector vs. The Select Sector |
| New Oriental vs. First Republic Bank | New Oriental vs. FibraHotel | New Oriental vs. Ameriprise Financial | New Oriental vs. Ross Stores |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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