Correlation Between TrueCar and DouYu International

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

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

Diversification Opportunities for TrueCar and DouYu International

0.71

Correlation Coefficient

TrueCar  DouYu International

Poor diversification

The 3 months correlation between TrueCar and DouYu is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding TrueCar and DouYu International Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DouYu International and TrueCar 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 TrueCar 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 TrueCar i.e., TrueCar and DouYu International go up and down completely randomly.

Pair Corralation between TrueCar and DouYu International

Given the investment horizon of 90 days TrueCar is expected to under-perform the DouYu International. But the stock apears to be less risky and, when comparing its historical volatility, TrueCar is 2.29 times less risky than DouYu International. The stock trades about -0.3 of its potential returns per unit of risk. The DouYu International Holdings is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,174  in DouYu International Holdings on December 25, 2024 and sell it today you would lose (409.00) from holding DouYu International Holdings or give up 34.84% of portfolio value over 90 days.

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

TrueCar  vs.  DouYu International Holdings

TrueCar

Risk-Adjusted Performance

Very Weak

Over the last 90 days TrueCar 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 rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with TrueCar and DouYu International

The main advantage of trading using opposite TrueCar and DouYu International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TrueCar 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 TrueCar 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.