Correlation Between Puxin and Youdao

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

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

Diversification Opportunities for Puxin and Youdao

0.03

Correlation Coefficient

Puxin  Youdao

Significant diversification

The 3 months correlation between Puxin and Youdao is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Puxin Limited and Youdao Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Youdao Inc and Puxin 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 Puxin Limited 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 Puxin i.e., Puxin and Youdao go up and down completely randomly.

Pair Corralation between Puxin and Youdao

Assuming the 90 days horizon Puxin Limited is expected to generate 3.19 times more return on investment than Youdao. However, Puxin is 3.19 times more volatile than Youdao Inc. It trades about 0.19 of its potential returns per unit of risk. Youdao Inc is currently generating about 0.04 per unit of risk. If you would invest  1.00  in Puxin Limited on September 19, 2024 and sell it today you would earn a total of  0.70  from holding Puxin Limited or generate 70.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	5.66%
Values	Daily Returns

Puxin Limited  vs.  Youdao Inc

Puxin Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Puxin Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Puxin is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the 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 uncertain basic indicators, Youdao displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Puxin and Youdao

The main advantage of trading using opposite Puxin and Youdao positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Puxin 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 Puxin Limited 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.