Correlation Between Meituan and Pinduoduo
Can any of the company-specific risk be diversified away by investing in both Meituan and Pinduoduo 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 Meituan and Pinduoduo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meituan and Pinduoduo, you can compare the effects of market volatilities on Meituan and Pinduoduo 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 Meituan with a short position of Pinduoduo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meituan and Pinduoduo.
Diversification Opportunities for Meituan and Pinduoduo
Very poor diversification
The 3 months correlation between Meituan and Pinduoduo is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Meituan and Pinduoduo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinduoduo and Meituan 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 Meituan are associated (or correlated) with Pinduoduo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinduoduo has no effect on the direction of Meituan i.e., Meituan and Pinduoduo go up and down completely randomly.
Pair Corralation between Meituan and Pinduoduo
Assuming the 90 days horizon Meituan is expected to generate 0.93 times more return on investment than Pinduoduo. However, Meituan is 1.07 times less risky than Pinduoduo. It trades about 0.05 of its potential returns per unit of risk. Pinduoduo is currently generating about 0.02 per unit of risk. If you would invest 1,542 in Meituan on August 29, 2024 and sell it today you would earn a total of 587.00 from holding Meituan or generate 38.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Meituan vs. Pinduoduo
Performance |
| Timeline |
| Meituan |
| Pinduoduo |
Meituan and Pinduoduo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meituan and Pinduoduo
The main advantage of trading using opposite Meituan and Pinduoduo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meituan position performs unexpectedly, Pinduoduo 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 Pinduoduo will offset losses from the drop in Pinduoduo's long position.| Meituan vs. BLUESCOPE STEEL | Meituan vs. ZANAGA IRON ORE | Meituan vs. LEGACY IRON ORE | Meituan vs. Boiron SA |
| Pinduoduo vs. Amazon Inc | Pinduoduo vs. Amazon Inc | Pinduoduo vs. Alibaba Group Holdings | Pinduoduo vs. JD Inc Adr |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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