Correlation Between EverQuote and TuanChe ADR

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

Diversification Opportunities for EverQuote and TuanChe ADR

-0.22

Correlation Coefficient

EverQuote  TuanChe ADR

Very good diversification

The 3 months correlation between EverQuote and TuanChe is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding EverQuote Class A and TuanChe ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TuanChe ADR 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 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 EverQuote i.e., EverQuote and TuanChe ADR go up and down completely randomly.

Pair Corralation between EverQuote and TuanChe ADR

Given the investment horizon of 90 days EverQuote Class A is expected to generate 1.46 times more return on investment than TuanChe ADR. However, EverQuote is 1.46 times more volatile than TuanChe ADR. It trades about 0.2 of its potential returns per unit of risk. TuanChe ADR is currently generating about -0.18 per unit of risk. If you would invest  2,035  in EverQuote Class A on November 29, 2024 and sell it today you would earn a total of  527.00  from holding EverQuote Class A or generate 25.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

EverQuote Class A  vs.  TuanChe ADR

EverQuote Class A

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EverQuote Class A are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, EverQuote reported solid returns over the last few months and may actually be approaching a breakup point.

TuanChe ADR

Risk-Adjusted Performance

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 rather sound fundamental indicators, TuanChe ADR is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with EverQuote and TuanChe ADR

The main advantage of trading using opposite EverQuote and TuanChe ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EverQuote 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 EverQuote Class A 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.