Correlation Between Apartment Investment and New Oriental

Can any of the company-specific risk be diversified away by investing in both Apartment Investment 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 Apartment Investment and New Oriental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Apartment Investment and and New Oriental Education, you can compare the effects of market volatilities on Apartment Investment 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 Apartment Investment with a short position of New Oriental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apartment Investment and New Oriental.

Diversification Opportunities for Apartment Investment and New Oriental

-0.43

Correlation Coefficient

Apartment Investment  New Oriental

Very good diversification

The 3 months correlation between Apartment and New is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Apartment Investment and 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 Apartment Investment 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 Apartment Investment and 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 Apartment Investment i.e., Apartment Investment and New Oriental go up and down completely randomly.

Pair Corralation between Apartment Investment and New Oriental

Assuming the 90 days trading horizon Apartment Investment and is expected to under-perform the New Oriental. But the stock apears to be less risky and, when comparing its historical volatility, Apartment Investment and is 1.7 times less risky than New Oriental. The stock trades about -0.03 of its potential returns per unit of risk. The New Oriental Education is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,862  in New Oriental Education on November 29, 2024 and sell it today you would lose (45.00) from holding New Oriental Education or give up 2.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Apartment Investment and  vs.  New Oriental Education

Apartment Investment and

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Apartment Investment and are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, Apartment Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

New Oriental Education

Risk-Adjusted Performance

Very Weak

Over the last 90 days New Oriental Education has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Apartment Investment and New Oriental

The main advantage of trading using opposite Apartment Investment and New Oriental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apartment Investment 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.

The idea behind Apartment Investment and and New Oriental Education pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.