Correlation Between YY and DouYu International

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

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

Diversification Opportunities for YY and DouYu International

-0.15

Correlation Coefficient

YY  DouYu International

Good diversification

The 3 months correlation between YY and DouYu is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding YY Inc Class and DouYu International Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DouYu International and YY 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 YY Inc Class 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 YY i.e., YY and DouYu International go up and down completely randomly.

Pair Corralation between YY and DouYu International

Allowing for the 90-day total investment horizon YY Inc Class is expected to generate 0.35 times more return on investment than DouYu International. However, YY Inc Class is 2.88 times less risky than DouYu International. It trades about 0.02 of its potential returns per unit of risk. DouYu International Holdings is currently generating about -0.02 per unit of risk. If you would invest  4,164  in YY Inc Class on December 26, 2024 and sell it today you would earn a total of  39.00  from holding YY Inc Class or generate 0.94% return on investment over 90 days.

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

YY Inc Class  vs.  DouYu International Holdings

YY Inc Class

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in YY Inc Class are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, YY is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 YY and DouYu International

The main advantage of trading using opposite YY and DouYu International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if YY 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 YY Inc Class 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.