Correlation Between ASOS Plc and Meituan ADR
Can any of the company-specific risk be diversified away by investing in both ASOS Plc and Meituan ADR 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 ASOS Plc and Meituan ADR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ASOS plc PK and Meituan ADR, you can compare the effects of market volatilities on ASOS Plc and Meituan ADR 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 ASOS Plc with a short position of Meituan ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASOS Plc and Meituan ADR.
Diversification Opportunities for ASOS Plc and Meituan ADR
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ASOS and Meituan is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding ASOS plc PK and Meituan ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meituan ADR and ASOS Plc 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 ASOS plc PK are associated (or correlated) with Meituan ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meituan ADR has no effect on the direction of ASOS Plc i.e., ASOS Plc and Meituan ADR go up and down completely randomly.
Pair Corralation between ASOS Plc and Meituan ADR
Assuming the 90 days horizon ASOS plc PK is expected to generate 0.8 times more return on investment than Meituan ADR. However, ASOS plc PK is 1.24 times less risky than Meituan ADR. It trades about 0.03 of its potential returns per unit of risk. Meituan ADR is currently generating about -0.12 per unit of risk. If you would invest 469.00 in ASOS plc PK on September 1, 2024 and sell it today you would earn a total of 6.00 from holding ASOS plc PK or generate 1.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
ASOS plc PK vs. Meituan ADR
Performance |
| Timeline |
| ASOS plc PK |
| Meituan ADR |
ASOS Plc and Meituan ADR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ASOS Plc and Meituan ADR
The main advantage of trading using opposite ASOS Plc and Meituan ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASOS Plc position performs unexpectedly, Meituan ADR 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 Meituan ADR will offset losses from the drop in Meituan ADR's long position.The idea behind ASOS plc PK and Meituan ADR 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.| Meituan ADR vs. PDD Holdings | Meituan ADR vs. JD Inc Adr | Meituan ADR vs. Baozun Inc | Meituan ADR vs. Global E Online |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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