Correlation Between New Oriental and Autodesk

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

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

Diversification Opportunities for New Oriental and Autodesk

-0.45

Correlation Coefficient

New Oriental  Autodesk

Very good diversification

The 3 months correlation between New and Autodesk is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding New Oriental Education and Autodesk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autodesk and New Oriental 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 New Oriental Education are associated (or correlated) with Autodesk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Autodesk has no effect on the direction of New Oriental i.e., New Oriental and Autodesk go up and down completely randomly.

Pair Corralation between New Oriental and Autodesk

Assuming the 90 days trading horizon New Oriental Education is expected to under-perform the Autodesk. In addition to that, New Oriental is 1.86 times more volatile than Autodesk. It trades about 0.0 of its total potential returns per unit of risk. Autodesk is currently generating about 0.21 per unit of volatility. If you would invest  37,311  in Autodesk on September 28, 2024 and sell it today you would earn a total of  8,945  from holding Autodesk or generate 23.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

New Oriental Education  vs.  Autodesk

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.

Autodesk

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Autodesk are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Autodesk sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New Oriental and Autodesk

The main advantage of trading using opposite New Oriental and Autodesk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Oriental position performs unexpectedly, Autodesk 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 Autodesk will offset losses from the drop in Autodesk's long position.

The idea behind New Oriental Education and Autodesk 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.