Correlation Between Lixiang Education and New Oriental

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

Diversification Opportunities for Lixiang Education and New Oriental

0.4

Correlation Coefficient

Lixiang Education  New Oriental

Very weak diversification

The 3 months correlation between Lixiang and New is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Lixiang Education Holding 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 Lixiang 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 Lixiang Education Holding 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 Lixiang Education i.e., Lixiang Education and New Oriental go up and down completely randomly.

Pair Corralation between Lixiang Education and New Oriental

Given the investment horizon of 90 days Lixiang Education is expected to generate 1.01 times less return on investment than New Oriental. In addition to that, Lixiang Education is 3.18 times more volatile than New Oriental Education. It trades about 0.02 of its total potential returns per unit of risk. New Oriental Education is currently generating about 0.05 per unit of volatility. If you would invest  3,666  in New Oriental Education on September 26, 2024 and sell it today you would earn a total of  2,722  from holding New Oriental Education or generate 74.25% return on investment over 90 days.

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

Lixiang Education Holding  vs.  New Oriental Education

Lixiang Education Holding

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lixiang Education Holding are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical and fundamental indicators, Lixiang Education demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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 latest inconsistent performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Lixiang Education and New Oriental

The main advantage of trading using opposite Lixiang Education and New Oriental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lixiang 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 Lixiang Education Holding 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.