Correlation Between DouYu International and Gaia

Can any of the company-specific risk be diversified away by investing in both DouYu International and Gaia 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 Gaia 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 Gaia Inc, you can compare the effects of market volatilities on DouYu International and Gaia 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 Gaia. Check out your portfolio center. Please also check ongoing floating volatility patterns of DouYu International and Gaia.

Diversification Opportunities for DouYu International and Gaia

0.05

Correlation Coefficient

DouYu International  Gaia

Significant diversification

The 3 months correlation between DouYu and Gaia is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding DouYu International Holdings and Gaia Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaia Inc 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 Gaia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaia Inc has no effect on the direction of DouYu International i.e., DouYu International and Gaia go up and down completely randomly.

Pair Corralation between DouYu International and Gaia

Given the investment horizon of 90 days DouYu International is expected to generate 3.45 times less return on investment than Gaia. In addition to that, DouYu International is 1.01 times more volatile than Gaia Inc. It trades about 0.08 of its total potential returns per unit of risk. Gaia Inc is currently generating about 0.27 per unit of volatility. If you would invest  297.00  in Gaia Inc on January 20, 2024 and sell it today you would earn a total of  82.00  from holding Gaia Inc or generate 27.61% 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.  Gaia Inc

DouYu International

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DouYu International Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, DouYu International may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Gaia Inc

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with DouYu International and Gaia

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

The idea behind DouYu International Holdings and Gaia 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.

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.