Correlation Between New Oriental and NOW

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

Diversification Opportunities for New Oriental and NOW

0.0

Correlation Coefficient

New Oriental  NOW

Pay attention - limited upside

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

Pair Corralation between New Oriental and NOW

If you would invest  23,800  in NOW Inc on October 22, 2024 and sell it today you would earn a total of  0.00  from holding NOW Inc or generate 0.0% return on investment over 90 days.

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

New Oriental Education  vs.  NOW 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. 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.

NOW Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NOW Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, NOW is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with New Oriental and NOW

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

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