Correlation Between New Oriental and Cogna Educacao

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

Diversification Opportunities for New Oriental and Cogna Educacao

-0.67

Correlation Coefficient

New Oriental  Cogna Educacao

Excellent diversification

The 3 months correlation between New and Cogna is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding New Oriental Education and Cogna Educacao SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogna Educacao SA 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 Cogna Educacao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cogna Educacao SA has no effect on the direction of New Oriental i.e., New Oriental and Cogna Educacao go up and down completely randomly.

Pair Corralation between New Oriental and Cogna Educacao

Considering the 90-day investment horizon New Oriental Education is expected to under-perform the Cogna Educacao. But the stock apears to be less risky and, when comparing its historical volatility, New Oriental Education is 2.21 times less risky than Cogna Educacao. The stock trades about -0.07 of its potential returns per unit of risk. The Cogna Educacao SA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  22.00  in Cogna Educacao SA on December 1, 2024 and sell it today you would earn a total of  11.00  from holding Cogna Educacao SA or generate 50.0% return on investment over 90 days.

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

New Oriental Education  vs.  Cogna Educacao SA

New Oriental Education

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Cogna Educacao SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cogna Educacao SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Cogna Educacao showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New Oriental and Cogna Educacao

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

The idea behind New Oriental Education and Cogna Educacao SA 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.