Correlation Between Meituan ADR and ZOZO
Can any of the company-specific risk be diversified away by investing in both Meituan ADR and ZOZO 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 ZOZO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meituan ADR and ZOZO Inc, you can compare the effects of market volatilities on Meituan ADR and ZOZO 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 ZOZO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meituan ADR and ZOZO.
Diversification Opportunities for Meituan ADR and ZOZO
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Meituan and ZOZO is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Meituan ADR and ZOZO Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZOZO Inc 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 ZOZO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZOZO Inc has no effect on the direction of Meituan ADR i.e., Meituan ADR and ZOZO go up and down completely randomly.
Pair Corralation between Meituan ADR and ZOZO
Assuming the 90 days horizon Meituan ADR is expected to under-perform the ZOZO. In addition to that, Meituan ADR is 14.28 times more volatile than ZOZO Inc. It trades about -0.12 of its total potential returns per unit of risk. ZOZO Inc is currently generating about -0.5 per unit of volatility. If you would invest 3,380 in ZOZO Inc on September 1, 2024 and sell it today you would lose (20.00) from holding ZOZO Inc or give up 0.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 19.05% |
| Values | Daily Returns |
Meituan ADR vs. ZOZO Inc
Performance |
| Timeline |
| Meituan ADR |
| ZOZO Inc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Meituan ADR and ZOZO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meituan ADR and ZOZO
The main advantage of trading using opposite Meituan ADR and ZOZO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meituan ADR position performs unexpectedly, ZOZO 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 ZOZO will offset losses from the drop in ZOZO's long position.| Meituan ADR vs. PDD Holdings | Meituan ADR vs. JD Inc Adr | Meituan ADR vs. Baozun Inc | Meituan ADR vs. Global E Online |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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