Correlation Between Sunlands Technology and WEBTOON Entertainment

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

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

Diversification Opportunities for Sunlands Technology and WEBTOON Entertainment

0.32

Correlation Coefficient

Sunlands Technology  WEBTOON Entertainment

Weak diversification

The 3 months correlation between Sunlands and WEBTOON is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Sunlands Technology Group and WEBTOON Entertainment Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WEBTOON Entertainment and Sunlands Technology 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 Sunlands Technology Group are associated (or correlated) with WEBTOON Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WEBTOON Entertainment has no effect on the direction of Sunlands Technology i.e., Sunlands Technology and WEBTOON Entertainment go up and down completely randomly.

Pair Corralation between Sunlands Technology and WEBTOON Entertainment

Considering the 90-day investment horizon Sunlands Technology Group is expected to generate 1.15 times more return on investment than WEBTOON Entertainment. However, Sunlands Technology is 1.15 times more volatile than WEBTOON Entertainment Common. It trades about 0.01 of its potential returns per unit of risk. WEBTOON Entertainment Common is currently generating about -0.16 per unit of risk. If you would invest  549.00  in Sunlands Technology Group on January 10, 2025 and sell it today you would lose (23.00) from holding Sunlands Technology Group or give up 4.19% of portfolio value over 90 days.

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

Sunlands Technology Group  vs.  WEBTOON Entertainment Common

Sunlands Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sunlands Technology Group has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

WEBTOON Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days WEBTOON Entertainment Common has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Sunlands Technology and WEBTOON Entertainment

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

The idea behind Sunlands Technology Group and WEBTOON Entertainment Common 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.