Correlation Between Gaotu Techedu and Youdao

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

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

Diversification Opportunities for Gaotu Techedu and Youdao

0.46

Correlation Coefficient

Gaotu Techedu  Youdao

Very weak diversification

The 3 months correlation between Gaotu and Youdao is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Gaotu Techedu DRC and Youdao Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Youdao Inc and Gaotu Techedu 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 Gaotu Techedu DRC are associated (or correlated) with Youdao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Youdao Inc has no effect on the direction of Gaotu Techedu i.e., Gaotu Techedu and Youdao go up and down completely randomly.

Pair Corralation between Gaotu Techedu and Youdao

Given the investment horizon of 90 days Gaotu Techedu DRC is expected to generate 0.85 times more return on investment than Youdao. However, Gaotu Techedu DRC is 1.18 times less risky than Youdao. It trades about 0.15 of its potential returns per unit of risk. Youdao Inc is currently generating about 0.07 per unit of risk. If you would invest  216.00  in Gaotu Techedu DRC on December 28, 2024 and sell it today you would earn a total of  119.00  from holding Gaotu Techedu DRC or generate 55.09% return on investment over 90 days.

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

Gaotu Techedu DRC  vs.  Youdao Inc

Gaotu Techedu DRC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gaotu Techedu DRC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Gaotu Techedu unveiled solid returns over the last few months and may actually be approaching a breakup point.

Youdao Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Youdao Inc are ranked lower than 5 (%) 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.

Pair Trading with Gaotu Techedu and Youdao

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

The idea behind Gaotu Techedu DRC and Youdao Inc 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.