Correlation Between Udemy and Fuwei Films

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

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

Diversification Opportunities for Udemy and Fuwei Films

-0.12

Correlation Coefficient

Udemy  Fuwei Films

Good diversification

The 3 months correlation between Udemy and Fuwei is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Udemy Inc and Fuwei Films Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuwei Films Holdings and Udemy 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 Udemy Inc are associated (or correlated) with Fuwei Films. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuwei Films Holdings has no effect on the direction of Udemy i.e., Udemy and Fuwei Films go up and down completely randomly.

Pair Corralation between Udemy and Fuwei Films

If you would invest  848.00  in Fuwei Films Holdings on February 1, 2024 and sell it today you would earn a total of  0.00  from holding Fuwei Films Holdings or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

Udemy Inc  vs.  Fuwei Films Holdings

Udemy Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Udemy Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Fuwei Films Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fuwei Films Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical indicators, Fuwei Films is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Udemy and Fuwei Films

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

The idea behind Udemy Inc and Fuwei Films Holdings 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.