Correlation Between Vasta Platform and Sunlands Technology

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

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

Diversification Opportunities for Vasta Platform and Sunlands Technology

0.21

Correlation Coefficient

Vasta Platform  Sunlands Technology

Modest diversification

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

Pair Corralation between Vasta Platform and Sunlands Technology

Given the investment horizon of 90 days Vasta Platform is expected to under-perform the Sunlands Technology. But the stock apears to be less risky and, when comparing its historical volatility, Vasta Platform is 2.72 times less risky than Sunlands Technology. The stock trades about -0.07 of its potential returns per unit of risk. The Sunlands Technology Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  710.00  in Sunlands Technology Group on September 1, 2024 and sell it today you would lose (34.00) from holding Sunlands Technology Group or give up 4.79% of portfolio value over 90 days.

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

Vasta Platform  vs.  Sunlands Technology Group

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.

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.

Pair Trading with Vasta Platform and Sunlands Technology

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

The idea behind Vasta Platform and Sunlands Technology Group 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.