Correlation Between Paramount Global and HUYA

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

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

Diversification Opportunities for Paramount Global and HUYA

-0.11

Correlation Coefficient

Paramount Global  HUYA

Good diversification

The 3 months correlation between Paramount and HUYA is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Paramount Global Class and HUYA Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUYA Inc and Paramount Global 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 Paramount Global Class are associated (or correlated) with HUYA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUYA Inc has no effect on the direction of Paramount Global i.e., Paramount Global and HUYA go up and down completely randomly.

Pair Corralation between Paramount Global and HUYA

Given the investment horizon of 90 days Paramount Global Class is expected to generate 1.2 times more return on investment than HUYA. However, Paramount Global is 1.2 times more volatile than HUYA Inc. It trades about 0.19 of its potential returns per unit of risk. HUYA Inc is currently generating about 0.08 per unit of risk. If you would invest  1,090  in Paramount Global Class on February 14, 2024 and sell it today you would earn a total of  229.50  from holding Paramount Global Class or generate 21.06% return on investment over 90 days.

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

Paramount Global Class  vs.  HUYA Inc

Paramount Global Class

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Paramount Global Class are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Paramount Global is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

HUYA Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HUYA Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HUYA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Paramount Global and HUYA

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

The idea behind Paramount Global Class and HUYA Inc 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.