Correlation Between Etsy and PDD Holdings
Can any of the company-specific risk be diversified away by investing in both Etsy and PDD Holdings 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 Etsy and PDD Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Etsy Inc and PDD Holdings, you can compare the effects of market volatilities on Etsy and PDD Holdings 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 Etsy with a short position of PDD Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Etsy and PDD Holdings.
Diversification Opportunities for Etsy and PDD Holdings
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Etsy and PDD is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Etsy Inc and PDD Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PDD Holdings and Etsy 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 Etsy Inc are associated (or correlated) with PDD Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PDD Holdings has no effect on the direction of Etsy i.e., Etsy and PDD Holdings go up and down completely randomly.
Pair Corralation between Etsy and PDD Holdings
Given the investment horizon of 90 days Etsy Inc is expected to under-perform the PDD Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Etsy Inc is 1.15 times less risky than PDD Holdings. The stock trades about -0.17 of its potential returns per unit of risk. The PDD Holdings is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 10,100 in PDD Holdings on October 20, 2024 and sell it today you would earn a total of 457.00 from holding PDD Holdings or generate 4.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Etsy Inc vs. PDD Holdings
Performance |
| Timeline |
| Etsy Inc |
| PDD Holdings |
Etsy and PDD Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Etsy and PDD Holdings
The main advantage of trading using opposite Etsy and PDD Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Etsy position performs unexpectedly, PDD Holdings 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 PDD Holdings will offset losses from the drop in PDD Holdings' long position.The idea behind Etsy Inc and PDD 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.| PDD Holdings vs. Alibaba Group Holding | PDD Holdings vs. Sea | PDD Holdings vs. MercadoLibre | PDD Holdings vs. Vipshop Holdings Limited |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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