Correlation Between Gaotu Techedu and Sunlands Technology

Can any of the company-specific risk be diversified away by investing in both Gaotu Techedu and Sunlands Technology 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 Sunlands Technology 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 Sunlands Technology Group, you can compare the effects of market volatilities on Gaotu Techedu and Sunlands Technology 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 Sunlands Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gaotu Techedu and Sunlands Technology.

Diversification Opportunities for Gaotu Techedu and Sunlands Technology

0.46

Correlation Coefficient

Gaotu Techedu  Sunlands Technology

Very weak diversification

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

Pair Corralation between Gaotu Techedu and Sunlands Technology

Given the investment horizon of 90 days Gaotu Techedu DRC is expected to under-perform the Sunlands Technology. But the stock apears to be less risky and, when comparing its historical volatility, Gaotu Techedu DRC is 1.05 times less risky than Sunlands Technology. The stock trades about -0.03 of its potential returns per unit of risk. The Sunlands Technology Group is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  676.00  in Sunlands Technology Group on November 28, 2024 and sell it today you would lose (37.00) from holding Sunlands Technology Group or give up 5.47% of portfolio value over 90 days.

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

Gaotu Techedu DRC  vs.  Sunlands Technology Group

Gaotu Techedu DRC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gaotu Techedu DRC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Sunlands Technology

Risk-Adjusted Performance

Weak

Over the last 90 days Sunlands Technology Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sunlands Technology is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Gaotu Techedu and Sunlands Technology

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

The idea behind Gaotu Techedu DRC and Sunlands Technology 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.