Correlation Between Udemy and China Resources
Can any of the company-specific risk be diversified away by investing in both Udemy and China Resources 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 Udemy and China Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Udemy Inc and China Resources Beer, you can compare the effects of market volatilities on Udemy and China Resources 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 Udemy with a short position of China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Udemy and China Resources.
Diversification Opportunities for Udemy and China Resources
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Udemy and China is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Udemy Inc and China Resources Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Beer and Udemy 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 Udemy Inc are associated (or correlated) with China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Beer has no effect on the direction of Udemy i.e., Udemy and China Resources go up and down completely randomly.
Pair Corralation between Udemy and China Resources
Given the investment horizon of 90 days Udemy Inc is expected to under-perform the China Resources. But the stock apears to be less risky and, when comparing its historical volatility, Udemy Inc is 2.09 times less risky than China Resources. The stock trades about -0.12 of its potential returns per unit of risk. The China Resources Beer is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 261.00 in China Resources Beer on October 25, 2024 and sell it today you would earn a total of 32.00 from holding China Resources Beer or generate 12.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 90.48% |
| Values | Daily Returns |
Udemy Inc vs. China Resources Beer
Performance |
| Timeline |
| Udemy Inc |
| China Resources Beer |
Udemy and China Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Udemy and China Resources
The main advantage of trading using opposite Udemy and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Udemy position performs unexpectedly, China Resources 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 China Resources will offset losses from the drop in China Resources' long position.The idea behind Udemy Inc and China Resources Beer 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.| China Resources vs. Molson Coors Brewing | China Resources vs. Budweiser Brewing | China Resources vs. Boston Beer | China Resources vs. Anheuser Busch InBev SANV |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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