Correlation Between Vitru and Gaotu Techedu

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

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

Diversification Opportunities for Vitru and Gaotu Techedu

0.23

Correlation Coefficient

Vitru  Gaotu Techedu

Modest diversification

The 3 months correlation between Vitru and Gaotu is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Vitru and Gaotu Techedu DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaotu Techedu DRC and Vitru 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 Vitru are associated (or correlated) with Gaotu Techedu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaotu Techedu DRC has no effect on the direction of Vitru i.e., Vitru and Gaotu Techedu go up and down completely randomly.

Pair Corralation between Vitru and Gaotu Techedu

If you would invest  304.00  in Gaotu Techedu DRC on September 4, 2024 and sell it today you would lose (14.00) from holding Gaotu Techedu DRC or give up 4.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

Vitru  vs.  Gaotu Techedu DRC

Vitru

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vitru has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Vitru is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Gaotu Techedu DRC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gaotu Techedu DRC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Gaotu Techedu is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vitru and Gaotu Techedu

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

The idea behind Vitru and Gaotu Techedu DRC 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.