Correlation Between PDD Holdings and Zalando SE
Can any of the company-specific risk be diversified away by investing in both PDD Holdings and Zalando SE 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 PDD Holdings and Zalando SE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PDD Holdings and Zalando SE, you can compare the effects of market volatilities on PDD Holdings and Zalando SE 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 PDD Holdings with a short position of Zalando SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of PDD Holdings and Zalando SE.
Diversification Opportunities for PDD Holdings and Zalando SE
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PDD and Zalando is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding PDD Holdings and Zalando SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zalando SE and PDD Holdings 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 PDD Holdings are associated (or correlated) with Zalando SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zalando SE has no effect on the direction of PDD Holdings i.e., PDD Holdings and Zalando SE go up and down completely randomly.
Pair Corralation between PDD Holdings and Zalando SE
Considering the 90-day investment horizon PDD Holdings is expected to generate 1.18 times more return on investment than Zalando SE. However, PDD Holdings is 1.18 times more volatile than Zalando SE. It trades about 0.02 of its potential returns per unit of risk. Zalando SE is currently generating about 0.0 per unit of risk. If you would invest 9,346 in PDD Holdings on September 3, 2024 and sell it today you would earn a total of 310.00 from holding PDD Holdings or generate 3.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
PDD Holdings vs. Zalando SE
Performance |
| Timeline |
| PDD Holdings |
| Zalando SE |
PDD Holdings and Zalando SE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PDD Holdings and Zalando SE
The main advantage of trading using opposite PDD Holdings and Zalando SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PDD Holdings position performs unexpectedly, Zalando SE 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 Zalando SE will offset losses from the drop in Zalando SE's long position.| 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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