Correlation Between New Oriental and Arco Platform

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

Diversification Opportunities for New Oriental and Arco Platform

0.0

Correlation Coefficient

New Oriental  Arco Platform

Pay attention - limited upside

The 3 months correlation between New and Arco is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding New Oriental Education and Arco Platform in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arco Platform 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 Arco Platform. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arco Platform has no effect on the direction of New Oriental i.e., New Oriental and Arco Platform go up and down completely randomly.

Pair Corralation between New Oriental and Arco Platform

If you would invest  6,089  in New Oriental Education on August 30, 2024 and sell it today you would lose (137.00) from holding New Oriental Education or give up 2.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

New Oriental Education  vs.  Arco Platform

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. In spite of comparatively stable fundamental indicators, New Oriental is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Arco Platform

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arco Platform has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Arco Platform is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with New Oriental and Arco Platform

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

The idea behind New Oriental Education and Arco Platform 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.