Correlation Between Youdao and Tigo Energy

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

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

Diversification Opportunities for Youdao and Tigo Energy

-0.7

Correlation Coefficient

Youdao  Tigo Energy

Excellent diversification

The 3 months correlation between Youdao and Tigo is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Youdao Inc and Tigo Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tigo Energy 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 Tigo Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tigo Energy has no effect on the direction of Youdao i.e., Youdao and Tigo Energy go up and down completely randomly.

Pair Corralation between Youdao and Tigo Energy

Considering the 90-day investment horizon Youdao is expected to generate 1.81 times less return on investment than Tigo Energy. But when comparing it to its historical volatility, Youdao Inc is 1.72 times less risky than Tigo Energy. It trades about 0.13 of its potential returns per unit of risk. Tigo Energy is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  83.00  in Tigo Energy on October 6, 2024 and sell it today you would earn a total of  11.00  from holding Tigo Energy or generate 13.25% 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.  Tigo Energy

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.

Tigo Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tigo Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Youdao and Tigo Energy

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

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