Correlation Between Ke Holdings and Dada Nexus

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

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

Diversification Opportunities for Ke Holdings and Dada Nexus

0.85

Correlation Coefficient

Ke Holdings  Dada Nexus

Very poor diversification

The 3 months correlation between BEKE and Dada is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Ke Holdings and Dada Nexus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dada Nexus and Ke 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 Ke Holdings are associated (or correlated) with Dada Nexus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dada Nexus has no effect on the direction of Ke Holdings i.e., Ke Holdings and Dada Nexus go up and down completely randomly.

Pair Corralation between Ke Holdings and Dada Nexus

Given the investment horizon of 90 days Ke Holdings is expected to generate 0.8 times more return on investment than Dada Nexus. However, Ke Holdings is 1.24 times less risky than Dada Nexus. It trades about -0.01 of its potential returns per unit of risk. Dada Nexus is currently generating about -0.05 per unit of risk. If you would invest  2,000  in Ke Holdings on September 27, 2024 and sell it today you would lose (152.00) from holding Ke Holdings or give up 7.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Ke Holdings  vs.  Dada Nexus

Ke Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ke Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking signals, Ke Holdings is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Dada Nexus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dada Nexus has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Ke Holdings and Dada Nexus

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

The idea behind Ke Holdings and Dada Nexus 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.