Correlation Between DouYu International and Prosus NV

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

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

Diversification Opportunities for DouYu International and Prosus NV

-0.56

Correlation Coefficient

DouYu International  Prosus NV

Excellent diversification

The 3 months correlation between DouYu and Prosus is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding DouYu International Holdings and Prosus NV ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosus NV ADR and DouYu International 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 DouYu International Holdings are associated (or correlated) with Prosus NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosus NV ADR has no effect on the direction of DouYu International i.e., DouYu International and Prosus NV go up and down completely randomly.

Pair Corralation between DouYu International and Prosus NV

Given the investment horizon of 90 days DouYu International Holdings is expected to under-perform the Prosus NV. In addition to that, DouYu International is 3.47 times more volatile than Prosus NV ADR. It trades about -0.01 of its total potential returns per unit of risk. Prosus NV ADR is currently generating about 0.12 per unit of volatility. If you would invest  794.00  in Prosus NV ADR on December 28, 2024 and sell it today you would earn a total of  144.00  from holding Prosus NV ADR or generate 18.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

DouYu International Holdings  vs.  Prosus NV ADR

DouYu International

Risk-Adjusted Performance

Very Weak

Over the last 90 days DouYu International Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Prosus NV ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prosus NV ADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Prosus NV showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DouYu International and Prosus NV

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

The idea behind DouYu International Holdings and Prosus NV ADR 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.