Correlation Between Dada Nexus and CarPartsCom

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

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

Diversification Opportunities for Dada Nexus and CarPartsCom

-0.04

Correlation Coefficient

Dada Nexus  CarPartsCom

Good diversification

The 3 months correlation between Dada and CarPartsCom is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Dada Nexus and CarPartsCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarPartsCom 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 CarPartsCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarPartsCom has no effect on the direction of Dada Nexus i.e., Dada Nexus and CarPartsCom go up and down completely randomly.

Pair Corralation between Dada Nexus and CarPartsCom

Given the investment horizon of 90 days Dada Nexus is expected to generate 1.11 times more return on investment than CarPartsCom. However, Dada Nexus is 1.11 times more volatile than CarPartsCom. It trades about 0.11 of its potential returns per unit of risk. CarPartsCom is currently generating about 0.0 per unit of risk. If you would invest  146.00  in Dada Nexus on December 1, 2024 and sell it today you would earn a total of  40.00  from holding Dada Nexus or generate 27.4% return on investment over 90 days.

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

Dada Nexus  vs.  CarPartsCom

Dada Nexus

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dada Nexus are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Dada Nexus sustained solid returns over the last few months and may actually be approaching a breakup point.

CarPartsCom

Risk-Adjusted Performance

Very Weak

Over the last 90 days CarPartsCom has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CarPartsCom is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Dada Nexus and CarPartsCom

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

The idea behind Dada Nexus and CarPartsCom 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.