Correlation Between Vasta Platform and New Oriental

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

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

Diversification Opportunities for Vasta Platform and New Oriental

0.18

Correlation Coefficient

Vasta Platform  New Oriental

Average diversification

The 3 months correlation between Vasta and New is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Vasta Platform 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 Vasta Platform 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 Vasta Platform 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 Vasta Platform i.e., Vasta Platform and New Oriental go up and down completely randomly.

Pair Corralation between Vasta Platform and New Oriental

Given the investment horizon of 90 days Vasta Platform is expected to under-perform the New Oriental. But the stock apears to be less risky and, when comparing its historical volatility, Vasta Platform is 1.16 times less risky than New Oriental. The stock trades about -0.03 of its potential returns per unit of risk. The New Oriental Education is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,516  in New Oriental Education on September 12, 2024 and sell it today you would earn a total of  1,786  from holding New Oriental Education or generate 39.55% return on investment over 90 days.

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

Vasta Platform  vs.  New Oriental Education

Vasta Platform

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vasta Platform has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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.

New Oriental Education

Risk-Adjusted Performance

3 of 100

Weak

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 comparatively weak fundamental indicators, New Oriental may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vasta Platform and New Oriental

The main advantage of trading using opposite Vasta Platform and New Oriental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vasta Platform 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 Vasta Platform 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.