Correlation Between MEITUAN UNSPADR/2B and Pinduoduo
Can any of the company-specific risk be diversified away by investing in both MEITUAN UNSPADR/2B 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 UNSPADR/2B and Pinduoduo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MEITUAN UNSPADR2B and Pinduoduo, you can compare the effects of market volatilities on MEITUAN UNSPADR/2B 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 UNSPADR/2B with a short position of Pinduoduo. Check out your portfolio center. Please also check ongoing floating volatility patterns of MEITUAN UNSPADR/2B and Pinduoduo.
Diversification Opportunities for MEITUAN UNSPADR/2B and Pinduoduo
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MEITUAN and Pinduoduo is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding MEITUAN UNSPADR2B and Pinduoduo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinduoduo and MEITUAN UNSPADR/2B 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 UNSPADR2B 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 UNSPADR/2B i.e., MEITUAN UNSPADR/2B and Pinduoduo go up and down completely randomly.
Pair Corralation between MEITUAN UNSPADR/2B and Pinduoduo
Assuming the 90 days trading horizon MEITUAN UNSPADR/2B is expected to generate 1.1 times less return on investment than Pinduoduo. In addition to that, MEITUAN UNSPADR/2B is 1.05 times more volatile than Pinduoduo. It trades about 0.04 of its total potential returns per unit of risk. Pinduoduo is currently generating about 0.05 per unit of volatility. If you would invest 6,440 in Pinduoduo on August 28, 2024 and sell it today you would earn a total of 3,080 from holding Pinduoduo or generate 47.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.72% |
| Values | Daily Returns |
MEITUAN UNSPADR2B vs. Pinduoduo
Performance |
| Timeline |
| MEITUAN UNSPADR/2B |
| Pinduoduo |
MEITUAN UNSPADR/2B and Pinduoduo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MEITUAN UNSPADR/2B and Pinduoduo
The main advantage of trading using opposite MEITUAN UNSPADR/2B and Pinduoduo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MEITUAN UNSPADR/2B 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.The idea behind MEITUAN UNSPADR2B and Pinduoduo 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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