Correlation Between BlackRock and New Oriental

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

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

Diversification Opportunities for BlackRock and New Oriental

-0.36

Correlation Coefficient

BlackRock  New Oriental

Very good diversification

The 3 months correlation between BlackRock and New is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock 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 BlackRock 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 BlackRock 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 BlackRock i.e., BlackRock and New Oriental go up and down completely randomly.

Pair Corralation between BlackRock and New Oriental

Assuming the 90 days trading horizon BlackRock is expected to generate 1.14 times less return on investment than New Oriental. But when comparing it to its historical volatility, BlackRock is 2.23 times less risky than New Oriental. It trades about 0.13 of its potential returns per unit of risk. New Oriental Education is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,453  in New Oriental Education on October 4, 2024 and sell it today you would earn a total of  1,154  from holding New Oriental Education or generate 79.42% return on investment over 90 days.

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

BlackRock  vs.  New Oriental Education

BlackRock

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BlackRock sustained solid returns over the last few months and may actually be approaching a breakup point.

New Oriental Education

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with BlackRock and New Oriental

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

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.