Correlation Between DouYu International and Farmhouse
Can any of the company-specific risk be diversified away by investing in both DouYu International and Farmhouse 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 DouYu International and Farmhouse into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DouYu International Holdings and Farmhouse, you can compare the effects of market volatilities on DouYu International and Farmhouse 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 DouYu International with a short position of Farmhouse. Check out your portfolio center. Please also check ongoing floating volatility patterns of DouYu International and Farmhouse.
Diversification Opportunities for DouYu International and Farmhouse
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between DouYu and Farmhouse is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding DouYu International Holdings and Farmhouse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmhouse and DouYu International 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 DouYu International Holdings are associated (or correlated) with Farmhouse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmhouse has no effect on the direction of DouYu International i.e., DouYu International and Farmhouse go up and down completely randomly.
Pair Corralation between DouYu International and Farmhouse
Given the investment horizon of 90 days DouYu International is expected to generate 23.78 times less return on investment than Farmhouse. But when comparing it to its historical volatility, DouYu International Holdings is 5.99 times less risky than Farmhouse. It trades about 0.03 of its potential returns per unit of risk. Farmhouse is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 9.90 in Farmhouse on August 29, 2024 and sell it today you would earn a total of 12.10 from holding Farmhouse or generate 122.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DouYu International Holdings vs. Farmhouse
Performance |
| Timeline |
| DouYu International |
| Farmhouse |
DouYu International and Farmhouse Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DouYu International and Farmhouse
The main advantage of trading using opposite DouYu International and Farmhouse positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DouYu International position performs unexpectedly, Farmhouse 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 Farmhouse will offset losses from the drop in Farmhouse's long position.| DouYu International vs. YY Inc Class | DouYu International vs. Weibo Corp | DouYu International vs. Tencent Music Entertainment | DouYu International vs. Autohome |
| Farmhouse vs. Powerstorm Holdings | Farmhouse vs. Phonex Inc | Farmhouse vs. Greystone Logistics | Farmhouse vs. Fortran Corp |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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