Correlation Between Afya and Youdao

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

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

Diversification Opportunities for Afya and Youdao

-0.65

Correlation Coefficient

Afya  Youdao

Excellent diversification

The 3 months correlation between Afya and Youdao is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Afya and Youdao Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Youdao Inc and Afya 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 Afya are associated (or correlated) with Youdao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Youdao Inc has no effect on the direction of Afya i.e., Afya and Youdao go up and down completely randomly.

Pair Corralation between Afya and Youdao

Given the investment horizon of 90 days Afya is expected to generate 2.12 times less return on investment than Youdao. But when comparing it to its historical volatility, Afya is 1.95 times less risky than Youdao. It trades about 0.02 of its potential returns per unit of risk. Youdao Inc is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  766.00  in Youdao Inc on October 4, 2024 and sell it today you would lose (26.00) from holding Youdao Inc or give up 3.39% of portfolio value over 90 days.

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

Afya  vs.  Youdao Inc

Afya

Risk-Adjusted Performance

0 of 100

Very Weak

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

Youdao Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Youdao Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Youdao displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Afya and Youdao

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

The idea behind Afya and Youdao Inc 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.