Correlation Between Baidu and DouYu International
Can any of the company-specific risk be diversified away by investing in both Baidu 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 Baidu and DouYu International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baidu Inc and DouYu International Holdings, you can compare the effects of market volatilities on Baidu 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 Baidu with a short position of DouYu International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baidu and DouYu International.
Diversification Opportunities for Baidu and DouYu International
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Baidu and DouYu is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Baidu Inc and DouYu International Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DouYu International and Baidu 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 Baidu Inc 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 Baidu i.e., Baidu and DouYu International go up and down completely randomly.
Pair Corralation between Baidu and DouYu International
Given the investment horizon of 90 days Baidu Inc is expected to under-perform the DouYu International. But the stock apears to be less risky and, when comparing its historical volatility, Baidu Inc is 1.68 times less risky than DouYu International. The stock trades about -0.07 of its potential returns per unit of risk. The DouYu International Holdings is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 1,040 in DouYu International Holdings on January 24, 2024 and sell it today you would lose (211.00) from holding DouYu International Holdings or give up 20.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baidu Inc vs. DouYu International Holdings
Performance |
| Timeline |
| Baidu Inc |
| DouYu International |
Baidu and DouYu International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baidu and DouYu International
The main advantage of trading using opposite Baidu and DouYu International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baidu 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 Baidu Inc 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.| 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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