Correlation Between New Oriental and British Amer
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
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between New and British is 0.48. 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 1.91 times more return on investment than British Amer. However, New Oriental is 1.91 times more volatile than British American Tobacco. It trades about 0.22 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.09 per unit of risk. If you would invest 7,195 in New Oriental Education on December 20, 2023 and sell it today you would earn a total of 1,967 from holding New Oriental Education or generate 27.34% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
New Oriental Education vs. British American Tobacco
Performance |
Timeline |
New Oriental Education |
British American Tobacco |
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. IhumanInc | New Oriental vs. Jianzhi Education Technology | New Oriental vs. 17 Education Technology | New Oriental vs. Vasta PlatformLtd |
British Amer vs. Kellanova | British Amer vs. Bunge Limited | British Amer vs. Lamb Weston Holdings | British Amer vs. Tootsie Roll Industries |
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 the Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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