Correlation Between Dada Nexus and Ke Holdings

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

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

Diversification Opportunities for Dada Nexus and Ke Holdings

0.85

Correlation Coefficient

Dada Nexus  Ke Holdings

Very poor diversification

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

Pair Corralation between Dada Nexus and Ke Holdings

Given the investment horizon of 90 days Dada Nexus is expected to under-perform the Ke Holdings. In addition to that, Dada Nexus is 1.24 times more volatile than Ke Holdings. It trades about -0.05 of its total potential returns per unit of risk. Ke Holdings is currently generating about -0.01 per unit of volatility. 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

Dada Nexus  vs.  Ke Holdings

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.

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.

Pair Trading with Dada Nexus and Ke Holdings

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

The idea behind Dada Nexus and Ke Holdings 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.