Correlation Between DouYu International and TuanChe ADR

Can any of the company-specific risk be diversified away by investing in both DouYu International and TuanChe ADR 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 TuanChe ADR 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 TuanChe ADR, you can compare the effects of market volatilities on DouYu International and TuanChe ADR 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 TuanChe ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of DouYu International and TuanChe ADR.

Diversification Opportunities for DouYu International and TuanChe ADR

-0.17

Correlation Coefficient

DouYu International  TuanChe ADR

Good diversification

The 3 months correlation between DouYu and TuanChe is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding DouYu International Holdings and TuanChe ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TuanChe 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 TuanChe ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TuanChe ADR has no effect on the direction of DouYu International i.e., DouYu International and TuanChe ADR go up and down completely randomly.

Pair Corralation between DouYu International and TuanChe ADR

Given the investment horizon of 90 days DouYu International Holdings is expected to generate 0.75 times more return on investment than TuanChe ADR. However, DouYu International Holdings is 1.33 times less risky than TuanChe ADR. It trades about 0.13 of its potential returns per unit of risk. TuanChe ADR is currently generating about -0.08 per unit of risk. If you would invest  897.00  in DouYu International Holdings on September 4, 2024 and sell it today you would earn a total of  362.00  from holding DouYu International Holdings or generate 40.36% return on investment over 90 days.

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

DouYu International Holdings  vs.  TuanChe ADR

DouYu International

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DouYu International Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, DouYu International unveiled solid returns over the last few months and may actually be approaching a breakup point.

TuanChe ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TuanChe ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with DouYu International and TuanChe ADR

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

The idea behind DouYu International Holdings and TuanChe 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.