Correlation Between Cheetah Mobile and Trivago NV

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

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

Diversification Opportunities for Cheetah Mobile and Trivago NV

0.58

Correlation Coefficient

Cheetah Mobile  Trivago NV

Very weak diversification

The 3 months correlation between Cheetah and Trivago is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Cheetah Mobile and Trivago NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trivago NV and Cheetah Mobile 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 Cheetah Mobile are associated (or correlated) with Trivago NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trivago NV has no effect on the direction of Cheetah Mobile i.e., Cheetah Mobile and Trivago NV go up and down completely randomly.

Pair Corralation between Cheetah Mobile and Trivago NV

Given the investment horizon of 90 days Cheetah Mobile is expected to under-perform the Trivago NV. But the stock apears to be less risky and, when comparing its historical volatility, Cheetah Mobile is 1.23 times less risky than Trivago NV. The stock trades about 0.0 of its potential returns per unit of risk. The Trivago NV is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  231.00  in Trivago NV on December 29, 2024 and sell it today you would earn a total of  242.00  from holding Trivago NV or generate 104.76% return on investment over 90 days.

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

Cheetah Mobile  vs.  Trivago NV

Cheetah Mobile

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cheetah Mobile has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Cheetah Mobile is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Trivago NV

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Trivago NV are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Trivago NV reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cheetah Mobile and Trivago NV

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

The idea behind Cheetah Mobile and Trivago NV 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 Global Correlations module to find global opportunities by holding instruments from different markets.