Correlation Between MEITUAN UNSPADR2B and Pinduoduo

Can any of the company-specific risk be diversified away by investing in both MEITUAN UNSPADR2B and Pinduoduo 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 UNSPADR2B and Pinduoduo into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MEITUAN UNSPADR2B and Pinduoduo, you can compare the effects of market volatilities on MEITUAN UNSPADR2B and Pinduoduo 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 UNSPADR2B with a short position of Pinduoduo. Check out your portfolio center. Please also check ongoing floating volatility patterns of MEITUAN UNSPADR2B and Pinduoduo.

Diversification Opportunities for MEITUAN UNSPADR2B and Pinduoduo

0.58

Correlation Coefficient

MEITUAN UNSPADR2B  Pinduoduo

Very weak diversification

The 3 months correlation between MEITUAN and Pinduoduo is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding MEITUAN UNSPADR2B and Pinduoduo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinduoduo and MEITUAN UNSPADR2B 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 UNSPADR2B are associated (or correlated) with Pinduoduo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinduoduo has no effect on the direction of MEITUAN UNSPADR2B i.e., MEITUAN UNSPADR2B and Pinduoduo go up and down completely randomly.

Pair Corralation between MEITUAN UNSPADR2B and Pinduoduo

Assuming the 90 days trading horizon MEITUAN UNSPADR2B is expected to generate 1.42 times more return on investment than Pinduoduo. However, MEITUAN UNSPADR2B is 1.42 times more volatile than Pinduoduo. It trades about 0.07 of its potential returns per unit of risk. Pinduoduo is currently generating about 0.0 per unit of risk. If you would invest  3,180  in MEITUAN UNSPADR2B on September 25, 2024 and sell it today you would earn a total of  620.00  from holding MEITUAN UNSPADR2B or generate 19.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

MEITUAN UNSPADR2B  vs.  Pinduoduo

MEITUAN UNSPADR2B

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MEITUAN UNSPADR2B are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain fundamental indicators, MEITUAN UNSPADR2B reported solid returns over the last few months and may actually be approaching a breakup point.

Pinduoduo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pinduoduo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Pinduoduo is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MEITUAN UNSPADR2B and Pinduoduo

The main advantage of trading using opposite MEITUAN UNSPADR2B and Pinduoduo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MEITUAN UNSPADR2B position performs unexpectedly, Pinduoduo 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 Pinduoduo will offset losses from the drop in Pinduoduo's long position.

The idea behind MEITUAN UNSPADR2B and Pinduoduo 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.

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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.