Correlation Between Stride and Gaotu Techedu

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

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

Diversification Opportunities for Stride and Gaotu Techedu

-0.49

Correlation Coefficient

Stride  Gaotu Techedu

Very good diversification

The 3 months correlation between Stride and Gaotu is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Stride Inc and Gaotu Techedu DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaotu Techedu DRC 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 Gaotu Techedu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaotu Techedu DRC has no effect on the direction of Stride i.e., Stride and Gaotu Techedu go up and down completely randomly.

Pair Corralation between Stride and Gaotu Techedu

Considering the 90-day investment horizon Stride Inc is expected to generate 0.94 times more return on investment than Gaotu Techedu. However, Stride Inc is 1.07 times less risky than Gaotu Techedu. It trades about 0.11 of its potential returns per unit of risk. Gaotu Techedu DRC is currently generating about 0.01 per unit of risk. If you would invest  8,066  in Stride Inc on September 4, 2024 and sell it today you would earn a total of  2,633  from holding Stride Inc or generate 32.64% return on investment over 90 days.

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

Stride Inc  vs.  Gaotu Techedu DRC

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.

Gaotu Techedu DRC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gaotu Techedu DRC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Stride and Gaotu Techedu

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

The idea behind Stride Inc and Gaotu Techedu DRC 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.

Check out your portfolio center.

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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.