Correlation Between DouYu International and Telefonica

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

Diversification Opportunities for DouYu International and Telefonica

-0.33

Correlation Coefficient

DouYu International  Telefonica

Very good diversification

The 3 months correlation between DouYu and Telefonica is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding DouYu International Holdings and Telefonica SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonica SA 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 Telefonica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefonica SA ADR has no effect on the direction of DouYu International i.e., DouYu International and Telefonica go up and down completely randomly.

Pair Corralation between DouYu International and Telefonica

Given the investment horizon of 90 days DouYu International Holdings is expected to under-perform the Telefonica. In addition to that, DouYu International is 8.25 times more volatile than Telefonica SA ADR. It trades about -0.02 of its total potential returns per unit of risk. Telefonica SA ADR is currently generating about 0.05 per unit of volatility. If you would invest  433.00  in Telefonica SA ADR on November 28, 2024 and sell it today you would earn a total of  11.00  from holding Telefonica SA ADR or generate 2.54% 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.  Telefonica SA 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 weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Telefonica SA ADR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonica SA ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Telefonica is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with DouYu International and Telefonica

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

The idea behind DouYu International Holdings and Telefonica SA 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.