Correlation Between Gaotu Techedu and Chegg
Can any of the company-specific risk be diversified away by investing in both Gaotu Techedu and Chegg 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 Gaotu Techedu and Chegg into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gaotu Techedu DRC and Chegg Inc, you can compare the effects of market volatilities on Gaotu Techedu and Chegg 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 Gaotu Techedu with a short position of Chegg. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gaotu Techedu and Chegg.
Diversification Opportunities for Gaotu Techedu and Chegg
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Gaotu and Chegg is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Gaotu Techedu DRC and Chegg Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chegg Inc and Gaotu Techedu 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 Gaotu Techedu DRC are associated (or correlated) with Chegg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chegg Inc has no effect on the direction of Gaotu Techedu i.e., Gaotu Techedu and Chegg go up and down completely randomly.
Pair Corralation between Gaotu Techedu and Chegg
Given the investment horizon of 90 days Gaotu Techedu DRC is expected to under-perform the Chegg. But the stock apears to be less risky and, when comparing its historical volatility, Gaotu Techedu DRC is 1.32 times less risky than Chegg. The stock trades about -0.08 of its potential returns per unit of risk. The Chegg Inc is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 166.00 in Chegg Inc on August 31, 2024 and sell it today you would earn a total of 64.00 from holding Chegg Inc or generate 38.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gaotu Techedu DRC vs. Chegg Inc
Performance |
| Timeline |
| Gaotu Techedu DRC |
| Chegg Inc |
Gaotu Techedu and Chegg Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gaotu Techedu and Chegg
The main advantage of trading using opposite Gaotu Techedu and Chegg positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gaotu Techedu position performs unexpectedly, Chegg 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 Chegg will offset losses from the drop in Chegg's long position.| Gaotu Techedu vs. TAL Education Group | Gaotu Techedu vs. 17 Education Technology | Gaotu Techedu vs. New Oriental Education | Gaotu Techedu vs. RLX Technology |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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