Correlation Between Youdao and WEBTOON Entertainment

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

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

Diversification Opportunities for Youdao and WEBTOON Entertainment

0.82

Correlation Coefficient

Youdao  WEBTOON Entertainment

Very poor diversification

The 3 months correlation between Youdao and WEBTOON is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Youdao Inc and WEBTOON Entertainment Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WEBTOON Entertainment 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 WEBTOON Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WEBTOON Entertainment has no effect on the direction of Youdao i.e., Youdao and WEBTOON Entertainment go up and down completely randomly.

Pair Corralation between Youdao and WEBTOON Entertainment

Considering the 90-day investment horizon Youdao Inc is expected to generate 0.86 times more return on investment than WEBTOON Entertainment. However, Youdao Inc is 1.16 times less risky than WEBTOON Entertainment. It trades about 0.02 of its potential returns per unit of risk. WEBTOON Entertainment Common is currently generating about -0.04 per unit of risk. If you would invest  777.00  in Youdao Inc on October 5, 2024 and sell it today you would lose (37.00) from holding Youdao Inc or give up 4.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	26.52%
Values	Daily Returns

Youdao Inc  vs.  WEBTOON Entertainment Common

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 uncertain basic indicators, Youdao displayed solid returns over the last few months and may actually be approaching a breakup point.

WEBTOON Entertainment

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Youdao and WEBTOON Entertainment

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

The idea behind Youdao Inc and WEBTOON Entertainment Common 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.