Correlation Between Cogna Educacao and New Oriental

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

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

Diversification Opportunities for Cogna Educacao and New Oriental

-0.23

Correlation Coefficient

Cogna Educacao  New Oriental

Very good diversification

The 3 months correlation between Cogna and New is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Cogna Educacao SA 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 Cogna Educacao 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 Cogna Educacao SA 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 Cogna Educacao i.e., Cogna Educacao and New Oriental go up and down completely randomly.

Pair Corralation between Cogna Educacao and New Oriental

Assuming the 90 days horizon Cogna Educacao SA is expected to under-perform the New Oriental. In addition to that, Cogna Educacao is 1.73 times more volatile than New Oriental Education. It trades about -0.02 of its total potential returns per unit of risk. New Oriental Education is currently generating about 0.04 per unit of volatility. If you would invest  5,967  in New Oriental Education on September 13, 2024 and sell it today you would earn a total of  288.00  from holding New Oriental Education or generate 4.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Cogna Educacao SA  vs.  New Oriental Education

Cogna Educacao SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cogna Educacao SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

New Oriental Education

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in New Oriental Education are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, New Oriental may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Cogna Educacao and New Oriental

The main advantage of trading using opposite Cogna Educacao and New Oriental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cogna Educacao 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 Cogna Educacao SA 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.