Correlation Between Bright Scholar and Youdao

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

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

Diversification Opportunities for Bright Scholar and Youdao

-0.44

Correlation Coefficient

Bright Scholar  Youdao

Very good diversification

The 3 months correlation between Bright and Youdao is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Bright Scholar Education and Youdao Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Youdao Inc and Bright Scholar 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 Bright Scholar Education 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 Bright Scholar i.e., Bright Scholar and Youdao go up and down completely randomly.

Pair Corralation between Bright Scholar and Youdao

Given the investment horizon of 90 days Bright Scholar is expected to generate 1.6 times less return on investment than Youdao. In addition to that, Bright Scholar is 1.13 times more volatile than Youdao Inc. It trades about 0.01 of its total potential returns per unit of risk. Youdao Inc is currently generating about 0.02 per unit of volatility. 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	Very Weak
Accuracy	99.19%
Values	Daily Returns

Bright Scholar Education  vs.  Youdao Inc

Bright Scholar Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bright Scholar Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private 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 Bright Scholar and Youdao

The main advantage of trading using opposite Bright Scholar and Youdao positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bright Scholar 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 Bright Scholar Education 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.