Correlation Between Groupon and DouYu International

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

By analyzing existing cross correlation between Groupon and DouYu International Holdings, you can compare the effects of market volatilities on Groupon 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 Groupon with a short position of DouYu International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Groupon and DouYu International.

Diversification Opportunities for Groupon and DouYu International

-0.28

Correlation Coefficient

Groupon  DouYu International

Very good diversification

The 3 months correlation between Groupon and DouYu is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Groupon and DouYu International Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DouYu International and Groupon 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 Groupon 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 Groupon i.e., Groupon and DouYu International go up and down completely randomly.

Pair Corralation between Groupon and DouYu International

Given the investment horizon of 90 days Groupon is expected to under-perform the DouYu International. But the stock apears to be less risky and, when comparing its historical volatility, Groupon is 1.14 times less risky than DouYu International. The stock trades about -0.46 of its potential returns per unit of risk. The DouYu International Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  762.00  in DouYu International Holdings on January 20, 2024 and sell it today you would earn a total of  41.00  from holding DouYu International Holdings or generate 5.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Groupon  vs.  DouYu International Holdings

Groupon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Groupon has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Groupon is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

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.

Pair Trading with Groupon and DouYu International

The main advantage of trading using opposite Groupon and DouYu International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Groupon 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 Groupon 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.