Correlation Between ASOS Plc and Meituan

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

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

Diversification Opportunities for ASOS Plc and Meituan

-0.52

Correlation Coefficient

ASOS Plc  Meituan

Excellent diversification

The 3 months correlation between ASOS and Meituan is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding ASOS plc PK and Meituan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meituan and ASOS Plc 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 ASOS plc PK are associated (or correlated) with Meituan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meituan has no effect on the direction of ASOS Plc i.e., ASOS Plc and Meituan go up and down completely randomly.

Pair Corralation between ASOS Plc and Meituan

Assuming the 90 days horizon ASOS plc PK is expected to under-perform the Meituan. But the pink sheet apears to be less risky and, when comparing its historical volatility, ASOS plc PK is 1.66 times less risky than Meituan. The pink sheet trades about -0.49 of its potential returns per unit of risk. The Meituan is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,910  in Meituan on December 2, 2024 and sell it today you would earn a total of  190.00  from holding Meituan or generate 9.95% return on investment over 90 days.

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

ASOS plc PK  vs.  Meituan

ASOS plc PK

Risk-Adjusted Performance

Very Weak

Over the last 90 days ASOS plc PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Meituan

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Meituan are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Meituan is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ASOS Plc and Meituan

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

The idea behind ASOS plc PK and Meituan 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.