Correlation Between Sunlands Technology and Vasta Platform

Can any of the company-specific risk be diversified away by investing in both Sunlands Technology and Vasta Platform 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 Vasta Platform 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 Vasta Platform, you can compare the effects of market volatilities on Sunlands Technology and Vasta Platform 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 Vasta Platform. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunlands Technology and Vasta Platform.

Diversification Opportunities for Sunlands Technology and Vasta Platform

0.21

Correlation Coefficient

Sunlands Technology  Vasta Platform

Modest diversification

The 3 months correlation between Sunlands and Vasta is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Sunlands Technology Group and Vasta Platform in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vasta Platform 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 Vasta Platform. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vasta Platform has no effect on the direction of Sunlands Technology i.e., Sunlands Technology and Vasta Platform go up and down completely randomly.

Pair Corralation between Sunlands Technology and Vasta Platform

Considering the 90-day investment horizon Sunlands Technology Group is expected to generate 1.66 times more return on investment than Vasta Platform. However, Sunlands Technology is 1.66 times more volatile than Vasta Platform. It trades about 0.05 of its potential returns per unit of risk. Vasta Platform is currently generating about -0.06 per unit of risk. If you would invest  660.00  in Sunlands Technology Group on September 1, 2024 and sell it today you would earn a total of  16.00  from holding Sunlands Technology Group or generate 2.42% return on investment over 90 days.

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

Sunlands Technology Group  vs.  Vasta Platform

Sunlands Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sunlands Technology Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Sunlands Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Vasta Platform

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vasta Platform are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Vasta Platform sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sunlands Technology and Vasta Platform

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

The idea behind Sunlands Technology Group and Vasta Platform 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.