Correlation Between EverQuote and Cheetah Mobile

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

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

Diversification Opportunities for EverQuote and Cheetah Mobile

0.65

Correlation Coefficient

EverQuote  Cheetah Mobile

Poor diversification

The 3 months correlation between EverQuote and Cheetah is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding EverQuote Class A and Cheetah Mobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheetah Mobile and EverQuote 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 EverQuote Class A are associated (or correlated) with Cheetah Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheetah Mobile has no effect on the direction of EverQuote i.e., EverQuote and Cheetah Mobile go up and down completely randomly.

Pair Corralation between EverQuote and Cheetah Mobile

Given the investment horizon of 90 days EverQuote is expected to generate 1.07 times less return on investment than Cheetah Mobile. In addition to that, EverQuote is 1.07 times more volatile than Cheetah Mobile. It trades about 0.19 of its total potential returns per unit of risk. Cheetah Mobile is currently generating about 0.21 per unit of volatility. If you would invest  174.00  in Cheetah Mobile on January 17, 2024 and sell it today you would earn a total of  311.00  from holding Cheetah Mobile or generate 178.74% return on investment over 90 days.

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

EverQuote Class A  vs.  Cheetah Mobile

EverQuote Class A

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in EverQuote Class A are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, EverQuote reported solid returns over the last few months and may actually be approaching a breakup point.

Cheetah Mobile

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cheetah Mobile are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Cheetah Mobile displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EverQuote and Cheetah Mobile

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

The idea behind EverQuote Class A and Cheetah Mobile 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.