Correlation Between Kuaishou Technology and YY

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

By analyzing existing cross correlation between Kuaishou Technology and YY Inc Class, you can compare the effects of market volatilities on Kuaishou Technology and YY 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 Kuaishou Technology with a short position of YY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kuaishou Technology and YY.

Diversification Opportunities for Kuaishou Technology and YY

0.08

Correlation Coefficient

Kuaishou Technology  YY

Significant diversification

The 3 months correlation between Kuaishou and YY is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Kuaishou Technology and YY Inc Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YY Inc Class and Kuaishou Technology 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 Kuaishou Technology are associated (or correlated) with YY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YY Inc Class has no effect on the direction of Kuaishou Technology i.e., Kuaishou Technology and YY go up and down completely randomly.

Pair Corralation between Kuaishou Technology and YY

Assuming the 90 days horizon Kuaishou Technology is expected to generate 2.5 times less return on investment than YY. In addition to that, Kuaishou Technology is 1.69 times more volatile than YY Inc Class. It trades about 0.08 of its total potential returns per unit of risk. YY Inc Class is currently generating about 0.33 per unit of volatility. If you would invest  3,362  in YY Inc Class on September 4, 2024 and sell it today you would earn a total of  874.00  from holding YY Inc Class or generate 26.0% return on investment over 90 days.

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

Kuaishou Technology  vs.  YY Inc Class

Kuaishou Technology

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kuaishou Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Kuaishou Technology showed solid returns over the last few months and may actually be approaching a breakup point.

YY Inc Class

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in YY Inc Class are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, YY showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kuaishou Technology and YY

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

The idea behind Kuaishou Technology and YY Inc Class 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.