Correlation Between China Liberal and Sunlands Technology

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

By analyzing existing cross correlation between China Liberal Education and Sunlands Technology Group, you can compare the effects of market volatilities on China Liberal 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 China Liberal with a short position of Sunlands Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Liberal and Sunlands Technology.

Diversification Opportunities for China Liberal and Sunlands Technology

0.78

Correlation Coefficient

China Liberal  Sunlands Technology

Poor diversification

The 3 months correlation between China and Sunlands is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding China Liberal Education and Sunlands Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunlands Technology and China Liberal 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 China Liberal Education 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 China Liberal i.e., China Liberal and Sunlands Technology go up and down completely randomly.

Pair Corralation between China Liberal and Sunlands Technology

Given the investment horizon of 90 days China Liberal Education is expected to generate 11.76 times more return on investment than Sunlands Technology. However, China Liberal is 11.76 times more volatile than Sunlands Technology Group. It trades about 0.07 of its potential returns per unit of risk. Sunlands Technology Group is currently generating about 0.02 per unit of risk. If you would invest  275.00  in China Liberal Education on September 25, 2024 and sell it today you would lose (16.00) from holding China Liberal Education or give up 5.82% of portfolio value over 90 days.

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

China Liberal Education  vs.  Sunlands Technology Group

China Liberal Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Liberal Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Sunlands Technology

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sunlands Technology Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Sunlands Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Liberal and Sunlands Technology

The main advantage of trading using opposite China Liberal and Sunlands Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Liberal 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.

The idea behind China Liberal Education and Sunlands Technology Group 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.