Correlation Between DouYu International and WEBTOON Entertainment

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

Diversification Opportunities for DouYu International and WEBTOON Entertainment

0.58

Correlation Coefficient

DouYu International  WEBTOON Entertainment

Very weak diversification

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

Pair Corralation between DouYu International and WEBTOON Entertainment

Given the investment horizon of 90 days DouYu International Holdings is expected to generate 1.31 times more return on investment than WEBTOON Entertainment. However, DouYu International is 1.31 times more volatile than WEBTOON Entertainment Common. It trades about 0.04 of its potential returns per unit of risk. WEBTOON Entertainment Common is currently generating about -0.05 per unit of risk. If you would invest  1,099  in DouYu International Holdings on September 26, 2024 and sell it today you would earn a total of  2.00  from holding DouYu International Holdings or generate 0.18% return on investment over 90 days.

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

DouYu International Holdings  vs.  WEBTOON Entertainment Common

DouYu International

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DouYu International Holdings are ranked lower than 5 (%) 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.

WEBTOON Entertainment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WEBTOON Entertainment Common are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, WEBTOON Entertainment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with DouYu International and WEBTOON Entertainment

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

The idea behind DouYu International Holdings and WEBTOON Entertainment Common 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.