Correlation Between Sunlands Technology and Wah Fu

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

Diversification Opportunities for Sunlands Technology and Wah Fu

0.39

Correlation Coefficient

Sunlands Technology  Wah Fu

Weak diversification

The 3 months correlation between Sunlands and Wah is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Sunlands Technology Group and Wah Fu Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wah Fu Education 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 Wah Fu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wah Fu Education has no effect on the direction of Sunlands Technology i.e., Sunlands Technology and Wah Fu go up and down completely randomly.

Pair Corralation between Sunlands Technology and Wah Fu

Considering the 90-day investment horizon Sunlands Technology is expected to generate 3.16 times less return on investment than Wah Fu. But when comparing it to its historical volatility, Sunlands Technology Group is 1.77 times less risky than Wah Fu. It trades about 0.02 of its potential returns per unit of risk. Wah Fu Education is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  168.00  in Wah Fu Education on December 28, 2024 and sell it today you would lose (4.00) from holding Wah Fu Education or give up 2.38% of portfolio value over 90 days.

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

Sunlands Technology Group  vs.  Wah Fu Education

Sunlands Technology

Risk-Adjusted Performance

Very Weak

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

Wah Fu Education

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wah Fu Education are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Wah Fu unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sunlands Technology and Wah Fu

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

The idea behind Sunlands Technology Group and Wah Fu Education 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.