Correlation Between 2U and Udemy

Can any of the company-specific risk be diversified away by investing in both 2U and Udemy 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 2U and Udemy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 2U Inc and Udemy Inc, you can compare the effects of market volatilities on 2U and Udemy 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 2U with a short position of Udemy. Check out your portfolio center. Please also check ongoing floating volatility patterns of 2U and Udemy.

Diversification Opportunities for 2U and Udemy

-0.32

Correlation Coefficient

2U  Udemy

Very good diversification

The 3 months correlation between 2U and Udemy is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding 2U Inc and Udemy Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Udemy Inc and 2U 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 2U Inc are associated (or correlated) with Udemy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Udemy Inc has no effect on the direction of 2U i.e., 2U and Udemy go up and down completely randomly.

Pair Corralation between 2U and Udemy

Given the investment horizon of 90 days 2U Inc is expected to generate 2.29 times more return on investment than Udemy. However, 2U is 2.29 times more volatile than Udemy Inc. It trades about 0.22 of its potential returns per unit of risk. Udemy Inc is currently generating about 0.06 per unit of risk. If you would invest  21.00  in 2U Inc on September 12, 2024 and sell it today you would earn a total of  6.00  from holding 2U Inc or generate 28.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	33.33%
Values	Daily Returns

2U Inc  vs.  Udemy Inc

2U Inc

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days 2U Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively weak basic indicators, 2U unveiled solid returns over the last few months and may actually be approaching a breakup point.

Udemy Inc

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Udemy Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain primary indicators, Udemy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with 2U and Udemy

The main advantage of trading using opposite 2U and Udemy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 2U position performs unexpectedly, Udemy 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 Udemy will offset losses from the drop in Udemy's long position.

The idea behind 2U Inc and Udemy 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.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.