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 ADR, 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

0.58

Correlation Coefficient

PDD Holdings  ZALANDO SE

Very weak diversification

The 3 months correlation between PDD and ZALANDO is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding PDD Holdings and ZALANDO SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZALANDO SE ADR 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 ADR 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 under-perform the ZALANDO SE. In addition to that, PDD Holdings is 1.54 times more volatile than ZALANDO SE ADR. It trades about 0.0 of its total potential returns per unit of risk. ZALANDO SE ADR is currently generating about 0.07 per unit of volatility. If you would invest  1,395  in ZALANDO SE ADR on September 9, 2024 and sell it today you would earn a total of  387.00  from holding ZALANDO SE ADR or generate 27.74% return on investment over 90 days.

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

PDD Holdings  vs.  ZALANDO SE ADR

PDD Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PDD Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental indicators, PDD Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ZALANDO SE ADR

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ZALANDO SE ADR are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, ZALANDO SE showed solid returns over the last few months and may actually be approaching a breakup point.

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.

The idea behind PDD Holdings and ZALANDO SE ADR 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.