Correlation Between KinderCare Learning and Sunlands Technology

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

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

Diversification Opportunities for KinderCare Learning and Sunlands Technology

0.71

Correlation Coefficient

KinderCare Learning  Sunlands Technology

Poor diversification

The 3 months correlation between KinderCare and Sunlands is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding KinderCare Learning Companies, and Sunlands Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunlands Technology and KinderCare Learning 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 KinderCare Learning Companies, 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 KinderCare Learning i.e., KinderCare Learning and Sunlands Technology go up and down completely randomly.

Pair Corralation between KinderCare Learning and Sunlands Technology

Considering the 90-day investment horizon KinderCare Learning Companies, is expected to under-perform the Sunlands Technology. But the stock apears to be less risky and, when comparing its historical volatility, KinderCare Learning Companies, is 1.17 times less risky than Sunlands Technology. The stock trades about -0.16 of its potential returns per unit of risk. The Sunlands Technology Group is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  540.00  in Sunlands Technology Group on January 8, 2025 and sell it today you would lose (8.00) from holding Sunlands Technology Group or give up 1.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

KinderCare Learning Companies,  vs.  Sunlands Technology Group

KinderCare Learning

Risk-Adjusted Performance

Very Weak

Over the last 90 days KinderCare Learning Companies, has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in May 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Sunlands Technology

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sunlands Technology Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Sunlands Technology is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with KinderCare Learning and Sunlands Technology

The main advantage of trading using opposite KinderCare Learning and Sunlands Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KinderCare Learning 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 KinderCare Learning Companies, 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.