Correlation Between Meituan and Delivery Hero
Can any of the company-specific risk be diversified away by investing in both Meituan and Delivery Hero 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 Delivery Hero into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meituan and Delivery Hero SE, you can compare the effects of market volatilities on Meituan and Delivery Hero 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 Delivery Hero. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meituan and Delivery Hero.
Diversification Opportunities for Meituan and Delivery Hero
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Meituan and Delivery is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Meituan and Delivery Hero SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delivery Hero SE 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 Delivery Hero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delivery Hero SE has no effect on the direction of Meituan i.e., Meituan and Delivery Hero go up and down completely randomly.
Pair Corralation between Meituan and Delivery Hero
Assuming the 90 days horizon Meituan is expected to generate 1.28 times more return on investment than Delivery Hero. However, Meituan is 1.28 times more volatile than Delivery Hero SE. It trades about -0.15 of its potential returns per unit of risk. Delivery Hero SE is currently generating about -0.25 per unit of risk. If you would invest 2,405 in Meituan on August 25, 2024 and sell it today you would lose (258.00) from holding Meituan or give up 10.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Meituan vs. Delivery Hero SE
Performance |
| Timeline |
| Meituan |
| Delivery Hero SE |
Meituan and Delivery Hero Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meituan and Delivery Hero
The main advantage of trading using opposite Meituan and Delivery Hero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meituan position performs unexpectedly, Delivery Hero 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 Delivery Hero will offset losses from the drop in Delivery Hero's long position.The idea behind Meituan and Delivery Hero SE 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.| Delivery Hero vs. 1StdibsCom | Delivery Hero vs. Natural Health Trend | Delivery Hero vs. Monotaro Co | Delivery Hero vs. Hour Loop |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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