Correlation Between Dell Technologies and New Oriental

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

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

Diversification Opportunities for Dell Technologies and New Oriental

-0.59

Correlation Coefficient

Dell Technologies  New Oriental

Excellent diversification

The 3 months correlation between Dell and New is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Dell Technologies 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 Dell Technologies 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 Dell Technologies 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 Dell Technologies i.e., Dell Technologies and New Oriental go up and down completely randomly.

Pair Corralation between Dell Technologies and New Oriental

Assuming the 90 days trading horizon Dell Technologies is expected to generate 66.58 times less return on investment than New Oriental. But when comparing it to its historical volatility, Dell Technologies is 1.7 times less risky than New Oriental. It trades about 0.0 of its potential returns per unit of risk. New Oriental Education is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,368  in New Oriental Education on September 28, 2024 and sell it today you would earn a total of  263.00  from holding New Oriental Education or generate 11.11% return on investment over 90 days.

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

Dell Technologies  vs.  New Oriental Education

Dell Technologies

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dell Technologies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Dell Technologies 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 somewhat strong fundamental indicators, New Oriental is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dell Technologies and New Oriental

The main advantage of trading using opposite Dell Technologies and New Oriental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dell Technologies 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 Dell Technologies 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.