Correlation Between Meituan ADR and PDD Holdings
Can any of the company-specific risk be diversified away by investing in both Meituan ADR 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 Meituan ADR and PDD Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meituan ADR and PDD Holdings, you can compare the effects of market volatilities on Meituan ADR 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 Meituan ADR with a short position of PDD Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meituan ADR and PDD Holdings.
Diversification Opportunities for Meituan ADR and PDD Holdings
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Meituan and PDD is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Meituan ADR and PDD Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PDD Holdings and Meituan 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 Meituan ADR 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 Meituan ADR i.e., Meituan ADR and PDD Holdings go up and down completely randomly.
Pair Corralation between Meituan ADR and PDD Holdings
Assuming the 90 days horizon Meituan ADR is expected to generate 1.35 times more return on investment than PDD Holdings. However, Meituan ADR is 1.35 times more volatile than PDD Holdings. It trades about -0.14 of its potential returns per unit of risk. PDD Holdings is currently generating about -0.35 per unit of risk. If you would invest 4,806 in Meituan ADR on September 3, 2024 and sell it today you would lose (636.00) from holding Meituan ADR or give up 13.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Meituan ADR vs. PDD Holdings
Performance |
| Timeline |
| Meituan ADR |
| PDD Holdings |
Meituan ADR and PDD Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meituan ADR and PDD Holdings
The main advantage of trading using opposite Meituan ADR and PDD Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meituan ADR 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.| Meituan ADR vs. Jd Com Inc | Meituan ADR vs. MOGU Inc | Meituan ADR vs. Oriental Culture Holding | Meituan ADR vs. Alibaba Group Holding |
| 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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