Correlation Between Udemy and Gaotu Techedu
Can any of the company-specific risk be diversified away by investing in both Udemy 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 Udemy and Gaotu Techedu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Udemy Inc and Gaotu Techedu DRC, you can compare the effects of market volatilities on Udemy 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 Udemy with a short position of Gaotu Techedu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Udemy and Gaotu Techedu.
Diversification Opportunities for Udemy and Gaotu Techedu
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Udemy and Gaotu is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Udemy Inc 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 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 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 Udemy i.e., Udemy and Gaotu Techedu go up and down completely randomly.
Pair Corralation between Udemy and Gaotu Techedu
Given the investment horizon of 90 days Udemy Inc is expected to under-perform the Gaotu Techedu. But the stock apears to be less risky and, when comparing its historical volatility, Udemy Inc is 2.02 times less risky than Gaotu Techedu. The stock trades about -0.25 of its potential returns per unit of risk. The Gaotu Techedu DRC is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 198.00 in Gaotu Techedu DRC on November 9, 2024 and sell it today you would earn a total of 37.00 from holding Gaotu Techedu DRC or generate 18.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Udemy Inc vs. Gaotu Techedu DRC
Performance |
| Timeline |
| Udemy Inc |
| Gaotu Techedu DRC |
Udemy and Gaotu Techedu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Udemy and Gaotu Techedu
The main advantage of trading using opposite Udemy and Gaotu Techedu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Udemy 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.The idea behind Udemy Inc and Gaotu Techedu DRC 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.| 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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