Correlation Between Elite Education and New Oriental

Can any of the company-specific risk be diversified away by investing in both Elite Education and New Oriental 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 Elite Education and New Oriental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Elite Education Group and New Oriental Education, you can compare the effects of market volatilities on Elite Education and New Oriental 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 Elite Education with a short position of New Oriental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elite Education and New Oriental.

Diversification Opportunities for Elite Education and New Oriental

0.52

Correlation Coefficient

Elite Education  New Oriental

Very weak diversification

The 3 months correlation between Elite and New is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Elite Education Group and New Oriental Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Oriental Education and Elite Education 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 Elite Education Group are associated (or correlated) with New Oriental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Oriental Education has no effect on the direction of Elite Education i.e., Elite Education and New Oriental go up and down completely randomly.

Pair Corralation between Elite Education and New Oriental

Given the investment horizon of 90 days Elite Education Group is expected to under-perform the New Oriental. In addition to that, Elite Education is 1.0 times more volatile than New Oriental Education. It trades about -0.11 of its total potential returns per unit of risk. New Oriental Education is currently generating about -0.09 per unit of volatility. If you would invest  6,320  in New Oriental Education on December 27, 2024 and sell it today you would lose (1,589) from holding New Oriental Education or give up 25.14% of portfolio value over 90 days.

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

Elite Education Group  vs.  New Oriental Education

Elite Education Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Elite Education Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's forward indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

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.

Pair Trading with Elite Education and New Oriental

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

The idea behind Elite Education Group and New Oriental Education 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.