Correlation Between Agilent Technologies and New Oriental

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

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

Diversification Opportunities for Agilent Technologies and New Oriental

0.53

Correlation Coefficient

Agilent Technologies  New Oriental

Very weak diversification

The 3 months correlation between Agilent and New is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Agilent Technologies 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 Agilent Technologies 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 Agilent Technologies 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 Agilent Technologies i.e., Agilent Technologies and New Oriental go up and down completely randomly.

Pair Corralation between Agilent Technologies and New Oriental

Assuming the 90 days trading horizon Agilent Technologies is expected to generate 1.35 times less return on investment than New Oriental. But when comparing it to its historical volatility, Agilent Technologies is 2.23 times less risky than New Oriental. It trades about 0.08 of its potential returns per unit of risk. New Oriental Education is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,253  in New Oriental Education on September 19, 2024 and sell it today you would earn a total of  163.00  from holding New Oriental Education or generate 7.23% return on investment over 90 days.

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

Agilent Technologies  vs.  New Oriental Education

Agilent Technologies

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Agilent Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Agilent Technologies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

New Oriental Education

Risk-Adjusted Performance

3 of 100

Insignificant

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. Despite somewhat 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 Agilent Technologies and New Oriental

The main advantage of trading using opposite Agilent Technologies and New Oriental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Agilent Technologies 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 Agilent Technologies 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.