Correlation Between New Oriental and KeyCorp

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

Diversification Opportunities for New Oriental and KeyCorp

-0.04

Correlation Coefficient

New Oriental  KeyCorp

Good diversification

The 3 months correlation between New and KeyCorp is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding New Oriental Education and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp 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 KeyCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KeyCorp has no effect on the direction of New Oriental i.e., New Oriental and KeyCorp go up and down completely randomly.

Pair Corralation between New Oriental and KeyCorp

Assuming the 90 days trading horizon New Oriental is expected to generate 2.04 times less return on investment than KeyCorp. But when comparing it to its historical volatility, New Oriental Education is 1.39 times less risky than KeyCorp. It trades about 0.17 of its potential returns per unit of risk. KeyCorp is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  8,941  in KeyCorp on September 13, 2024 and sell it today you would earn a total of  2,591  from holding KeyCorp or generate 28.98% return on investment over 90 days.

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

New Oriental Education  vs.  KeyCorp

New Oriental Education

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in New Oriental Education are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, New Oriental sustained solid returns over the last few months and may actually be approaching a breakup point.

KeyCorp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KeyCorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, KeyCorp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New Oriental and KeyCorp

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

The idea behind New Oriental Education and KeyCorp 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.

Check out your portfolio center.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.