Correlation Between New Oriental and TotalEnergies

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

Diversification Opportunities for New Oriental and TotalEnergies

0.25

Correlation Coefficient

New Oriental  TotalEnergies

Modest diversification

The 3 months correlation between New and TotalEnergies is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding New Oriental Education and TotalEnergies SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TotalEnergies SE 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 TotalEnergies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TotalEnergies SE has no effect on the direction of New Oriental i.e., New Oriental and TotalEnergies go up and down completely randomly.

Pair Corralation between New Oriental and TotalEnergies

Assuming the 90 days trading horizon New Oriental Education is expected to generate 0.17 times more return on investment than TotalEnergies. However, New Oriental Education is 5.73 times less risky than TotalEnergies. It trades about 0.04 of its potential returns per unit of risk. TotalEnergies SE is currently generating about -0.06 per unit of risk. If you would invest  124,300  in New Oriental Education on October 25, 2024 and sell it today you would earn a total of  1,034  from holding New Oriental Education or generate 0.83% return on investment over 90 days.

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

New Oriental Education  vs.  TotalEnergies SE

New Oriental Education

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in New Oriental Education are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, New Oriental is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

TotalEnergies SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TotalEnergies SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with New Oriental and TotalEnergies

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

The idea behind New Oriental Education and TotalEnergies SE 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.