Correlation Between Golden Sun and Youdao

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

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

Diversification Opportunities for Golden Sun and Youdao

-0.8

Correlation Coefficient

Golden Sun  Youdao

Pay attention - limited upside

The 3 months correlation between Golden and Youdao is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Golden Sun Education and Youdao Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Youdao Inc and Golden Sun 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 Golden Sun Education 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 Golden Sun i.e., Golden Sun and Youdao go up and down completely randomly.

Pair Corralation between Golden Sun and Youdao

Given the investment horizon of 90 days Golden Sun is expected to generate 4.31 times less return on investment than Youdao. In addition to that, Golden Sun is 2.04 times more volatile than Youdao Inc. It trades about 0.01 of its total potential returns per unit of risk. Youdao Inc is currently generating about 0.05 per unit of volatility. If you would invest  447.00  in Youdao Inc on September 12, 2024 and sell it today you would earn a total of  296.00  from holding Youdao Inc or generate 66.22% return on investment over 90 days.

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

Golden Sun Education  vs.  Youdao Inc

Golden Sun Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Golden Sun Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Youdao Inc

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Youdao Inc are ranked lower than 18 (%) 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.

Pair Trading with Golden Sun and Youdao

The main advantage of trading using opposite Golden Sun and Youdao positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Golden Sun 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 Golden Sun Education 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.