Correlation Between Youdao and Vestis

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

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

Diversification Opportunities for Youdao and Vestis

0.73

Correlation Coefficient

Youdao  Vestis

Poor diversification

The 3 months correlation between Youdao and Vestis is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Youdao Inc and Vestis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestis 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 Vestis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestis has no effect on the direction of Youdao i.e., Youdao and Vestis go up and down completely randomly.

Pair Corralation between Youdao and Vestis

Considering the 90-day investment horizon Youdao Inc is expected to generate 1.42 times more return on investment than Vestis. However, Youdao is 1.42 times more volatile than Vestis. It trades about 0.13 of its potential returns per unit of risk. Vestis is currently generating about 0.08 per unit of risk. If you would invest  512.00  in Youdao Inc on October 10, 2024 and sell it today you would earn a total of  168.00  from holding Youdao Inc or generate 32.81% return on investment over 90 days.

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

Youdao Inc  vs.  Vestis

Youdao Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Youdao Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Youdao displayed solid returns over the last few months and may actually be approaching a breakup point.

Vestis

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vestis are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Vestis unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Youdao and Vestis

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

The idea behind Youdao Inc and Vestis 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.