Correlation Between New Oriental and Laureate Education

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

Diversification Opportunities for New Oriental and Laureate Education

-0.64

Correlation Coefficient

New Oriental  Laureate Education

Excellent diversification

The 3 months correlation between New and Laureate is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding New Oriental Education and Laureate Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laureate Education 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 Laureate Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laureate Education has no effect on the direction of New Oriental i.e., New Oriental and Laureate Education go up and down completely randomly.

Pair Corralation between New Oriental and Laureate Education

Considering the 90-day investment horizon New Oriental Education is expected to under-perform the Laureate Education. In addition to that, New Oriental is 1.72 times more volatile than Laureate Education. It trades about -0.15 of its total potential returns per unit of risk. Laureate Education is currently generating about -0.11 per unit of volatility. If you would invest  1,549  in Laureate Education on March 7, 2024 and sell it today you would lose (54.00) from holding Laureate Education or give up 3.49% of portfolio value over 90 days.

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

New Oriental Education  vs.  Laureate Education

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 uncertain performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in July 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Laureate Education

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Laureate Education are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Laureate Education may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with New Oriental and Laureate Education

The main advantage of trading using opposite New Oriental and Laureate Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Oriental position performs unexpectedly, Laureate Education 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 Laureate Education will offset losses from the drop in Laureate Education's long position.

The idea behind New Oriental Education and Laureate 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.