Correlation Between New Oriental and British Amer

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

Diversification Opportunities for New Oriental and British Amer

-0.31
  Correlation Coefficient

Very good diversification

The 3 months correlation between New Oriental and British is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding New Oriental Education and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 British Amer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of New Oriental i.e., New Oriental and British Amer go up and down completely randomly.

Pair Corralation between New Oriental and British Amer

Considering the 90-day investment horizon New Oriental Education is expected to generate 3.81 times more return on investment than British Amer. However, New Oriental is 3.81 times more volatile than British American Tobacco. It trades about 0.12 of its potential returns per unit of risk. British American Tobacco is currently generating about -0.08 per unit of risk. If you would invest  1,290  in New Oriental Education on July 2, 2022 and sell it today you would earn a total of  1,226  from holding New Oriental Education or generate 95.04% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

New Oriental Education  vs.  British American Tobacco

 Performance (%) 
       Timeline  
New Oriental Education 
New Oriental Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in New Oriental Education are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively sluggish fundamental indicators, New Oriental unveiled solid returns over the last few months and may actually be approaching a breakup point.

New Oriental Price Channel

British American Tobacco 
British Performance
0 of 100
Over the last 90 days British American Tobacco has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in October 2022. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

British Price Channel

New Oriental and British Amer Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with New Oriental and British Amer

The main advantage of trading using opposite New Oriental and British Amer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Oriental position performs unexpectedly, British Amer 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 British Amer will offset losses from the drop in British Amer's long position.
New Oriental vs. Vroom Inc
The idea behind New Oriental Education and British American Tobacco 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.
British Amer vs. Amazon Inc
Check out your portfolio center. 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 Transaction History module to view history of all your transactions and understand their impact on performance.

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