Correlation Between Asset Entities and DouYu International

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

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

Diversification Opportunities for Asset Entities and DouYu International

-0.55

Correlation Coefficient

Asset Entities  DouYu International

Excellent diversification

The 3 months correlation between Asset and DouYu is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Asset Entities 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 Asset Entities 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 Asset Entities 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 Asset Entities i.e., Asset Entities and DouYu International go up and down completely randomly.

Pair Corralation between Asset Entities and DouYu International

Given the investment horizon of 90 days Asset Entities Class is expected to under-perform the DouYu International. In addition to that, Asset Entities is 2.24 times more volatile than DouYu International Holdings. It trades about -0.07 of its total potential returns per unit of risk. DouYu International Holdings is currently generating about 0.07 per unit of volatility. If you would invest  762.00  in DouYu International Holdings on January 20, 2024 and sell it today you would earn a total of  41.00  from holding DouYu International Holdings or generate 5.38% return on investment over 90 days.

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

Asset Entities Class  vs.  DouYu International Holdings

Asset Entities Class

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Asset Entities Class are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Asset Entities unveiled solid returns over the last few months and may actually be approaching a breakup point.

DouYu International

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DouYu International Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, DouYu International may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Asset Entities and DouYu International

The main advantage of trading using opposite Asset Entities and DouYu International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asset Entities 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 Asset Entities 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.