Correlation Between Sunlands Technology and Youdao

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

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

Diversification Opportunities for Sunlands Technology and Youdao

0.13

Correlation Coefficient

Sunlands Technology  Youdao

Average diversification

The 3 months correlation between Sunlands and Youdao is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Sunlands Technology Group and Youdao Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Youdao Inc and Sunlands Technology 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 Sunlands Technology Group 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 Sunlands Technology i.e., Sunlands Technology and Youdao go up and down completely randomly.

Pair Corralation between Sunlands Technology and Youdao

Considering the 90-day investment horizon Sunlands Technology Group is expected to generate 1.48 times more return on investment than Youdao. However, Sunlands Technology is 1.48 times more volatile than Youdao Inc. It trades about 0.05 of its potential returns per unit of risk. Youdao Inc is currently generating about 0.05 per unit of risk. If you would invest  467.00  in Sunlands Technology Group on September 12, 2024 and sell it today you would earn a total of  172.00  from holding Sunlands Technology Group or generate 36.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.72%
Values	Daily Returns

Sunlands Technology Group  vs.  Youdao Inc

Sunlands Technology

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Sunlands Technology Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sunlands Technology is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 Sunlands Technology and Youdao

The main advantage of trading using opposite Sunlands Technology and Youdao positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunlands Technology 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 Sunlands Technology Group 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.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.