Correlation Between YY and TuanChe ADR

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

Diversification Opportunities for YY and TuanChe ADR

-0.31

Correlation Coefficient

YY  TuanChe ADR

Very good diversification

The 3 months correlation between YY and TuanChe is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding YY Inc Class and TuanChe ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TuanChe ADR 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 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 YY i.e., YY and TuanChe ADR go up and down completely randomly.

Pair Corralation between YY and TuanChe ADR

Allowing for the 90-day total investment horizon YY Inc Class is expected to generate 0.4 times more return on investment than TuanChe ADR. However, YY Inc Class is 2.48 times less risky than TuanChe ADR. It trades about 0.06 of its potential returns per unit of risk. TuanChe ADR is currently generating about -0.05 per unit of risk. If you would invest  2,654  in YY Inc Class on December 2, 2024 and sell it today you would earn a total of  2,025  from holding YY Inc Class or generate 76.3% 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.  TuanChe ADR

YY Inc Class

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in YY Inc Class are ranked lower than 5 (%) 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.

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 latest weak performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with YY and TuanChe ADR

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

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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.