Correlation Between Lincoln Educational and Gaotu Techedu
Can any of the company-specific risk be diversified away by investing in both Lincoln Educational and Gaotu Techedu 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 Lincoln Educational and Gaotu Techedu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lincoln Educational Services and Gaotu Techedu DRC, you can compare the effects of market volatilities on Lincoln Educational and Gaotu Techedu 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 Lincoln Educational with a short position of Gaotu Techedu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lincoln Educational and Gaotu Techedu.
Diversification Opportunities for Lincoln Educational and Gaotu Techedu
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lincoln and Gaotu is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Educational Services and Gaotu Techedu DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaotu Techedu DRC and Lincoln Educational 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 Lincoln Educational Services are associated (or correlated) with Gaotu Techedu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaotu Techedu DRC has no effect on the direction of Lincoln Educational i.e., Lincoln Educational and Gaotu Techedu go up and down completely randomly.
Pair Corralation between Lincoln Educational and Gaotu Techedu
Given the investment horizon of 90 days Lincoln Educational is expected to generate 1.45 times less return on investment than Gaotu Techedu. But when comparing it to its historical volatility, Lincoln Educational Services is 2.42 times less risky than Gaotu Techedu. It trades about 0.08 of its potential returns per unit of risk. Gaotu Techedu DRC is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 141.00 in Gaotu Techedu DRC on August 24, 2024 and sell it today you would earn a total of 120.00 from holding Gaotu Techedu DRC or generate 85.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lincoln Educational Services vs. Gaotu Techedu DRC
Performance |
| Timeline |
| Lincoln Educational |
| Gaotu Techedu DRC |
Lincoln Educational and Gaotu Techedu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lincoln Educational and Gaotu Techedu
The main advantage of trading using opposite Lincoln Educational and Gaotu Techedu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lincoln Educational position performs unexpectedly, Gaotu Techedu 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 Gaotu Techedu will offset losses from the drop in Gaotu Techedu's long position.| Lincoln Educational vs. Vasta Platform | Lincoln Educational vs. Laureate Education | Lincoln Educational vs. American Public Education | Lincoln Educational vs. Adtalem Global Education |
| Gaotu Techedu vs. TAL Education Group | Gaotu Techedu vs. Strategic Education | Gaotu Techedu vs. Vasta Platform | Gaotu Techedu vs. Afya |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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