Correlation Between EverQuote and DouYu International

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

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

Diversification Opportunities for EverQuote and DouYu International

-0.51

Correlation Coefficient

EverQuote  DouYu International

Excellent diversification

The 3 months correlation between EverQuote and DouYu is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding EverQuote Class A and DouYu International Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DouYu International and EverQuote 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 EverQuote Class A are associated (or correlated) with DouYu International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DouYu International has no effect on the direction of EverQuote i.e., EverQuote and DouYu International go up and down completely randomly.

Pair Corralation between EverQuote and DouYu International

Given the investment horizon of 90 days EverQuote is expected to generate 9.8 times less return on investment than DouYu International. But when comparing it to its historical volatility, EverQuote Class A is 1.59 times less risky than DouYu International. It trades about 0.01 of its potential returns per unit of risk. DouYu International Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  789.00  in DouYu International Holdings on September 20, 2024 and sell it today you would earn a total of  323.00  from holding DouYu International Holdings or generate 40.94% return on investment over 90 days.

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

EverQuote Class A  vs.  DouYu International Holdings

EverQuote Class A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EverQuote Class A has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

DouYu International

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DouYu International Holdings are ranked lower than 8 (%) 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.

Pair Trading with EverQuote and DouYu International

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

The idea behind EverQuote Class A and DouYu International Holdings 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.