Correlation Between Gaotu Techedu and Wah Fu

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

Diversification Opportunities for Gaotu Techedu and Wah Fu

0.79

Correlation Coefficient

Gaotu Techedu  Wah Fu

Poor diversification

The 3 months correlation between Gaotu and Wah is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Gaotu Techedu DRC and Wah Fu Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wah Fu Education 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 Wah Fu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wah Fu Education has no effect on the direction of Gaotu Techedu i.e., Gaotu Techedu and Wah Fu go up and down completely randomly.

Pair Corralation between Gaotu Techedu and Wah Fu

Given the investment horizon of 90 days Gaotu Techedu DRC is expected to generate 1.37 times more return on investment than Wah Fu. However, Gaotu Techedu is 1.37 times more volatile than Wah Fu Education. It trades about 0.01 of its potential returns per unit of risk. Wah Fu Education is currently generating about -0.03 per unit of risk. If you would invest  272.00  in Gaotu Techedu DRC on September 12, 2024 and sell it today you would lose (22.00) from holding Gaotu Techedu DRC or give up 8.09% of portfolio value over 90 days.

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

Gaotu Techedu DRC  vs.  Wah Fu Education

Gaotu Techedu DRC

Risk-Adjusted Performance

0 of 100

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 comparatively stable basic indicators, Gaotu Techedu is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Wah Fu Education

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Gaotu Techedu and Wah Fu

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

The idea behind Gaotu Techedu DRC and Wah Fu Education 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.