Correlation Between Phoenix New and Youdao

Can any of the company-specific risk be diversified away by investing in both Phoenix New and Youdao 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 Phoenix New and Youdao into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Phoenix New Media and Youdao Inc, you can compare the effects of market volatilities on Phoenix New and Youdao 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 Phoenix New with a short position of Youdao. Check out your portfolio center. Please also check ongoing floating volatility patterns of Phoenix New and Youdao.

Diversification Opportunities for Phoenix New and Youdao

0.25

Correlation Coefficient

Phoenix New  Youdao

Modest diversification

The 3 months correlation between Phoenix and Youdao is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Phoenix New Media and Youdao Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Youdao Inc and Phoenix New 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 Phoenix New Media are associated (or correlated) with Youdao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Youdao Inc has no effect on the direction of Phoenix New i.e., Phoenix New and Youdao go up and down completely randomly.

Pair Corralation between Phoenix New and Youdao

Given the investment horizon of 90 days Phoenix New Media is expected to generate 2.24 times more return on investment than Youdao. However, Phoenix New is 2.24 times more volatile than Youdao Inc. It trades about 0.08 of its potential returns per unit of risk. Youdao Inc is currently generating about -0.14 per unit of risk. If you would invest  165.00  in Phoenix New Media on January 26, 2024 and sell it today you would earn a total of  11.00  from holding Phoenix New Media or generate 6.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Phoenix New Media  vs.  Youdao Inc

Phoenix New Media

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Phoenix New Media are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Phoenix New reported solid returns over the last few months and may actually be approaching a breakup point.

Youdao Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Youdao Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Youdao may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Phoenix New and Youdao

The main advantage of trading using opposite Phoenix New and Youdao positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Phoenix New position performs unexpectedly, Youdao 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 Youdao will offset losses from the drop in Youdao's long position.

The idea behind Phoenix New Media and Youdao Inc 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.