Correlation Between Gaotu Techedu and Sunlands Technology
Can any of the company-specific risk be diversified away by investing in both Gaotu Techedu 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 Gaotu Techedu and Sunlands Technology 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 Sunlands Technology Group, you can compare the effects of market volatilities on Gaotu Techedu 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 Gaotu Techedu with a short position of Sunlands Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gaotu Techedu and Sunlands Technology.
Diversification Opportunities for Gaotu Techedu and Sunlands Technology
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Gaotu and Sunlands is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Gaotu Techedu DRC and Sunlands Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunlands Technology 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 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 Gaotu Techedu i.e., Gaotu Techedu and Sunlands Technology go up and down completely randomly.
Pair Corralation between Gaotu Techedu and Sunlands Technology
Given the investment horizon of 90 days Gaotu Techedu DRC is expected to under-perform the Sunlands Technology. But the stock apears to be less risky and, when comparing its historical volatility, Gaotu Techedu DRC is 1.21 times less risky than Sunlands Technology. The stock trades about -0.38 of its potential returns per unit of risk. The Sunlands Technology Group is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest 709.00 in Sunlands Technology Group on August 27, 2024 and sell it today you would lose (58.00) from holding Sunlands Technology Group or give up 8.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gaotu Techedu DRC vs. Sunlands Technology Group
Performance |
| Timeline |
| Gaotu Techedu DRC |
| Sunlands Technology |
Gaotu Techedu and Sunlands Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gaotu Techedu and Sunlands Technology
The main advantage of trading using opposite Gaotu Techedu and Sunlands Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gaotu Techedu 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.| Gaotu Techedu vs. TAL Education Group | Gaotu Techedu vs. 17 Education Technology | Gaotu Techedu vs. New Oriental Education | Gaotu Techedu vs. RLX Technology |
| Sunlands Technology vs. American Public Education | Sunlands Technology vs. Lincoln Educational Services | Sunlands Technology vs. Adtalem Global Education |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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