Correlation Between Target and Dingdong ADR

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

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

Diversification Opportunities for Target and Dingdong ADR

-0.61

Correlation Coefficient

Target  Dingdong ADR

Excellent diversification

The 3 months correlation between Target and Dingdong is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Target and Dingdong ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dingdong ADR and Target 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 Target are associated (or correlated) with Dingdong ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dingdong ADR has no effect on the direction of Target i.e., Target and Dingdong ADR go up and down completely randomly.

Pair Corralation between Target and Dingdong ADR

Considering the 90-day investment horizon Target is expected to under-perform the Dingdong ADR. But the stock apears to be less risky and, when comparing its historical volatility, Target is 1.77 times less risky than Dingdong ADR. The stock trades about -0.06 of its potential returns per unit of risk. The Dingdong ADR is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  260.00  in Dingdong ADR on September 18, 2024 and sell it today you would earn a total of  164.00  from holding Dingdong ADR or generate 63.08% return on investment over 90 days.

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

Target  vs.  Dingdong ADR

Target

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Target has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Dingdong ADR

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dingdong ADR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain fundamental indicators, Dingdong ADR disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Target and Dingdong ADR

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

The idea behind Target and Dingdong 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.