Correlation Between New Oriental and GoPro

Can any of the company-specific risk be diversified away by investing in both New Oriental and GoPro 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 GoPro 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 GoPro Inc, you can compare the effects of market volatilities on New Oriental and GoPro 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 GoPro. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Oriental and GoPro.

Diversification Opportunities for New Oriental and GoPro

0.02

Correlation Coefficient

New Oriental  GoPro

Significant diversification

The 3 months correlation between New and GoPro is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding New Oriental Education and GoPro Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoPro Inc 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 GoPro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoPro Inc has no effect on the direction of New Oriental i.e., New Oriental and GoPro go up and down completely randomly.

Pair Corralation between New Oriental and GoPro

Assuming the 90 days trading horizon New Oriental Education is expected to generate 1.13 times more return on investment than GoPro. However, New Oriental is 1.13 times more volatile than GoPro Inc. It trades about 0.03 of its potential returns per unit of risk. GoPro Inc is currently generating about -0.09 per unit of risk. If you would invest  1,389  in New Oriental Education on October 26, 2024 and sell it today you would earn a total of  461.00  from holding New Oriental Education or generate 33.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

New Oriental Education  vs.  GoPro Inc

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 weak performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

GoPro Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GoPro Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite 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.

Pair Trading with New Oriental and GoPro

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

The idea behind New Oriental Education and GoPro Inc 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.