Correlation Between TuanChe ADR and Nextdoor Holdings

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

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

Diversification Opportunities for TuanChe ADR and Nextdoor Holdings

-0.35

Correlation Coefficient

TuanChe ADR  Nextdoor Holdings

Very good diversification

The 3 months correlation between TuanChe and Nextdoor is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding TuanChe ADR and Nextdoor Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextdoor Holdings and TuanChe ADR 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 TuanChe ADR are associated (or correlated) with Nextdoor Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextdoor Holdings has no effect on the direction of TuanChe ADR i.e., TuanChe ADR and Nextdoor Holdings go up and down completely randomly.

Pair Corralation between TuanChe ADR and Nextdoor Holdings

Allowing for the 90-day total investment horizon TuanChe ADR is expected to under-perform the Nextdoor Holdings. In addition to that, TuanChe ADR is 2.45 times more volatile than Nextdoor Holdings. It trades about -0.08 of its total potential returns per unit of risk. Nextdoor Holdings is currently generating about 0.03 per unit of volatility. If you would invest  238.00  in Nextdoor Holdings on September 3, 2024 and sell it today you would earn a total of  5.00  from holding Nextdoor Holdings or generate 2.1% return on investment over 90 days.

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

TuanChe ADR  vs.  Nextdoor Holdings

TuanChe ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TuanChe ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Nextdoor Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nextdoor Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Nextdoor Holdings is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with TuanChe ADR and Nextdoor Holdings

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

The idea behind TuanChe ADR and Nextdoor 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.