Correlation Between Lincoln Educational and New Oriental

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

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

Diversification Opportunities for Lincoln Educational and New Oriental

-0.46

Correlation Coefficient

Lincoln Educational  New Oriental

Very good diversification

The 3 months correlation between Lincoln and New is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Educational Services 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 Lincoln Educational 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 Lincoln Educational Services 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 Lincoln Educational i.e., Lincoln Educational and New Oriental go up and down completely randomly.

Pair Corralation between Lincoln Educational and New Oriental

Given the investment horizon of 90 days Lincoln Educational Services is expected to generate 0.83 times more return on investment than New Oriental. However, Lincoln Educational Services is 1.2 times less risky than New Oriental. It trades about 0.01 of its potential returns per unit of risk. New Oriental Education is currently generating about -0.09 per unit of risk. If you would invest  1,587  in Lincoln Educational Services on December 24, 2024 and sell it today you would lose (9.00) from holding Lincoln Educational Services or give up 0.57% of portfolio value over 90 days.

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

Lincoln Educational Services  vs.  New Oriental Education

Lincoln Educational

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lincoln Educational Services are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Lincoln Educational is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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 Lincoln Educational and New Oriental

The main advantage of trading using opposite Lincoln Educational and New Oriental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lincoln Educational 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 Lincoln Educational Services 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.