Correlation Between Dillards and PDD Holdings

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

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

Diversification Opportunities for Dillards and PDD Holdings

-0.9

Correlation Coefficient

Dillards  PDD Holdings

Pay attention - limited upside

The 3 months correlation between Dillards and PDD is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Dillards and PDD Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PDD Holdings and Dillards 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 Dillards are associated (or correlated) with PDD Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PDD Holdings has no effect on the direction of Dillards i.e., Dillards and PDD Holdings go up and down completely randomly.

Pair Corralation between Dillards and PDD Holdings

Considering the 90-day investment horizon Dillards is expected to generate 0.74 times more return on investment than PDD Holdings. However, Dillards is 1.35 times less risky than PDD Holdings. It trades about 0.03 of its potential returns per unit of risk. PDD Holdings is currently generating about 0.02 per unit of risk. If you would invest  36,263  in Dillards on October 24, 2024 and sell it today you would earn a total of  10,671  from holding Dillards or generate 29.43% return on investment over 90 days.

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

Dillards  vs.  PDD Holdings

Dillards

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dillards are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental indicators, Dillards unveiled solid returns over the last few months and may actually be approaching a breakup point.

PDD Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Dillards and PDD Holdings

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

The idea behind Dillards and PDD 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.

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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.