Correlation Between Meituan ADR and Prosus
Can any of the company-specific risk be diversified away by investing in both Meituan ADR and Prosus 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 Prosus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meituan ADR and Prosus, you can compare the effects of market volatilities on Meituan ADR and Prosus 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 Prosus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meituan ADR and Prosus.
Diversification Opportunities for Meituan ADR and Prosus
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Meituan and Prosus is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Meituan ADR and Prosus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosus 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 Prosus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosus has no effect on the direction of Meituan ADR i.e., Meituan ADR and Prosus go up and down completely randomly.
Pair Corralation between Meituan ADR and Prosus
Assuming the 90 days horizon Meituan ADR is expected to generate 2.12 times less return on investment than Prosus. But when comparing it to its historical volatility, Meituan ADR is 1.94 times less risky than Prosus. It trades about 0.01 of its potential returns per unit of risk. Prosus is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 7,000 in Prosus on September 3, 2024 and sell it today you would lose (3,045) from holding Prosus or give up 43.5% 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. Prosus
Performance |
| Timeline |
| Meituan ADR |
| Prosus |
Meituan ADR and Prosus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meituan ADR and Prosus
The main advantage of trading using opposite Meituan ADR and Prosus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meituan ADR position performs unexpectedly, Prosus 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 Prosus will offset losses from the drop in Prosus' 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 |
| Prosus vs. Tencent Holdings | Prosus vs. Autohome | Prosus vs. Arena Group Holdings | Prosus vs. Golden Grail Technology |
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 Stocks Directory module to find actively traded stocks across global markets.
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