Correlation Between Youdao and Aspen

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

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

Diversification Opportunities for Youdao and Aspen

-0.8

Correlation Coefficient

Youdao  Aspen

Pay attention - limited upside

The 3 months correlation between Youdao and Aspen is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Youdao Inc and Aspen Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aspen Group 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 Aspen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aspen Group has no effect on the direction of Youdao i.e., Youdao and Aspen go up and down completely randomly.

Pair Corralation between Youdao and Aspen

If you would invest  713.00  in Youdao Inc on October 22, 2024 and sell it today you would lose (5.00) from holding Youdao Inc or give up 0.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	5.26%
Values	Daily Returns

Youdao Inc  vs.  Aspen Group

Youdao Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Youdao Inc are ranked lower than 13 (%) 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.

Aspen Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aspen Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Aspen is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Youdao and Aspen

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

The idea behind Youdao Inc and Aspen Group 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 Transaction History module to view history of all your transactions and understand their impact on performance.