Correlation Between Dingdong ADR and Consumer Staples

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Can any of the company-specific risk be diversified away by investing in both Dingdong ADR and Consumer Staples 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 Dingdong ADR and Consumer Staples into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dingdong ADR and Consumer Staples Portfolio, you can compare the effects of market volatilities on Dingdong ADR and Consumer Staples 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 Dingdong ADR with a short position of Consumer Staples. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dingdong ADR and Consumer Staples.

Diversification Opportunities for Dingdong ADR and Consumer Staples

-0.61
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Dingdong and Consumer is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Dingdong ADR and Consumer Staples Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Staples Por and Dingdong ADR 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 Dingdong ADR are associated (or correlated) with Consumer Staples. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Staples Por has no effect on the direction of Dingdong ADR i.e., Dingdong ADR and Consumer Staples go up and down completely randomly.

Pair Corralation between Dingdong ADR and Consumer Staples

Considering the 90-day investment horizon Dingdong ADR is expected to generate 8.84 times more return on investment than Consumer Staples. However, Dingdong ADR is 8.84 times more volatile than Consumer Staples Portfolio. It trades about 0.2 of its potential returns per unit of risk. Consumer Staples Portfolio is currently generating about -0.01 per unit of risk. If you would invest  199.00  in Dingdong ADR on August 28, 2024 and sell it today you would earn a total of  172.00  from holding Dingdong ADR or generate 86.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Dingdong ADR  vs.  Consumer Staples Portfolio

 Performance 
       Timeline  
Dingdong ADR 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Dingdong ADR are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Dingdong ADR disclosed solid returns over the last few months and may actually be approaching a breakup point.
Consumer Staples Por 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Consumer Staples Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Consumer Staples is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Dingdong ADR and Consumer Staples Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dingdong ADR and Consumer Staples

The main advantage of trading using opposite Dingdong ADR and Consumer Staples positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dingdong ADR position performs unexpectedly, Consumer Staples 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 Consumer Staples will offset losses from the drop in Consumer Staples' long position.
The idea behind Dingdong ADR and Consumer Staples Portfolio 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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