Correlation Between New Oriental and G Collado

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

Diversification Opportunities for New Oriental and G Collado

-0.57

Correlation Coefficient

New Oriental  G Collado

Excellent diversification

The 3 months correlation between New and COLLADO is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding New Oriental Education and G Collado SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G Collado SAB 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 G Collado. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G Collado SAB has no effect on the direction of New Oriental i.e., New Oriental and G Collado go up and down completely randomly.

Pair Corralation between New Oriental and G Collado

Assuming the 90 days trading horizon New Oriental Education is expected to generate 11.68 times more return on investment than G Collado. However, New Oriental is 11.68 times more volatile than G Collado SAB. It trades about 0.05 of its potential returns per unit of risk. G Collado SAB is currently generating about 0.0 per unit of risk. If you would invest  82,756  in New Oriental Education on October 11, 2024 and sell it today you would earn a total of  43,844  from holding New Oriental Education or generate 52.98% return on investment over 90 days.

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

New Oriental Education  vs.  G Collado SAB

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 weak performance in the last few months, the Stock's basic indicators remain fairly 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.

G Collado SAB

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in G Collado SAB are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, G Collado is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with New Oriental and G Collado

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

The idea behind New Oriental Education and G Collado SAB 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.