Correlation Between DouYu International and WPP PLC
Can any of the company-specific risk be diversified away by investing in both DouYu International and WPP PLC 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 WPP PLC 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 WPP PLC ADR, you can compare the effects of market volatilities on DouYu International and WPP PLC 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 WPP PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of DouYu International and WPP PLC.
Diversification Opportunities for DouYu International and WPP PLC
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between DouYu and WPP is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding DouYu International Holdings and WPP PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPP PLC ADR 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 WPP PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WPP PLC ADR has no effect on the direction of DouYu International i.e., DouYu International and WPP PLC go up and down completely randomly.
Pair Corralation between DouYu International and WPP PLC
Given the investment horizon of 90 days DouYu International Holdings is expected to generate 4.32 times more return on investment than WPP PLC. However, DouYu International is 4.32 times more volatile than WPP PLC ADR. It trades about 0.06 of its potential returns per unit of risk. WPP PLC ADR is currently generating about 0.09 per unit of risk. If you would invest 752.00 in DouYu International Holdings on August 27, 2024 and sell it today you would earn a total of 271.00 from holding DouYu International Holdings or generate 36.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DouYu International Holdings vs. WPP PLC ADR
Performance |
| Timeline |
| DouYu International |
| WPP PLC ADR |
DouYu International and WPP PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DouYu International and WPP PLC
The main advantage of trading using opposite DouYu International and WPP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DouYu International position performs unexpectedly, WPP PLC 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 WPP PLC will offset losses from the drop in WPP PLC's long position.| DouYu International vs. YY Inc Class | DouYu International vs. Weibo Corp | DouYu International vs. Tencent Music Entertainment | DouYu International vs. Autohome |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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