Correlation Between Stride and Youdao

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

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

Diversification Opportunities for Stride and Youdao

0.58

Correlation Coefficient

Stride  Youdao

Very weak diversification

The 3 months correlation between Stride and Youdao is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Stride Inc and Youdao Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Youdao Inc and Stride 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 Stride Inc 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 Stride i.e., Stride and Youdao go up and down completely randomly.

Pair Corralation between Stride and Youdao

Considering the 90-day investment horizon Stride is expected to generate 2.5 times less return on investment than Youdao. But when comparing it to its historical volatility, Stride Inc is 1.27 times less risky than Youdao. It trades about 0.11 of its potential returns per unit of risk. Youdao Inc is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  323.00  in Youdao Inc on September 11, 2024 and sell it today you would earn a total of  420.00  from holding Youdao Inc or generate 130.03% return on investment over 90 days.

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

Stride Inc  vs.  Youdao Inc

Stride Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stride Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Stride displayed solid returns over the last few months and may actually be approaching a breakup point.

Youdao Inc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Youdao Inc are ranked lower than 17 (%) 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 Stride and Youdao

The main advantage of trading using opposite Stride and Youdao positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stride 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 Stride Inc 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.