Correlation Between Youdao and Afya

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

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

Diversification Opportunities for Youdao and Afya

-0.66

Correlation Coefficient

Youdao  Afya

Excellent diversification

The 3 months correlation between Youdao and Afya is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Youdao Inc and Afya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afya and Youdao 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 Youdao Inc are associated (or correlated) with Afya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Afya has no effect on the direction of Youdao i.e., Youdao and Afya go up and down completely randomly.

Pair Corralation between Youdao and Afya

Considering the 90-day investment horizon Youdao Inc is expected to generate 1.96 times more return on investment than Afya. However, Youdao is 1.96 times more volatile than Afya. It trades about 0.22 of its potential returns per unit of risk. Afya is currently generating about -0.19 per unit of risk. If you would invest  507.00  in Youdao Inc on October 7, 2024 and sell it today you would earn a total of  201.00  from holding Youdao Inc or generate 39.64% return on investment over 90 days.

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

Youdao Inc  vs.  Afya

Youdao Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Youdao Inc are ranked lower than 8 (%) 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.

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.

Pair Trading with Youdao and Afya

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

The idea behind Youdao Inc and Afya 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.