Correlation Between Delivery Hero and Meituan

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

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

Diversification Opportunities for Delivery Hero and Meituan

0.08

Correlation Coefficient

Delivery Hero  Meituan

Significant diversification

The 3 months correlation between Delivery and Meituan is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Delivery Hero SE and Meituan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meituan and Delivery Hero 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 Delivery Hero SE 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 Delivery Hero i.e., Delivery Hero and Meituan go up and down completely randomly.

Pair Corralation between Delivery Hero and Meituan

Assuming the 90 days horizon Delivery Hero SE is expected to under-perform the Meituan. But the pink sheet apears to be less risky and, when comparing its historical volatility, Delivery Hero SE is 1.18 times less risky than Meituan. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Meituan is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,959  in Meituan on December 30, 2024 and sell it today you would earn a total of  171.00  from holding Meituan or generate 8.73% return on investment over 90 days.

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

Delivery Hero SE  vs.  Meituan

Delivery Hero SE

Risk-Adjusted Performance

Very Weak

Over the last 90 days Delivery Hero SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical 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

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Meituan are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Meituan reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Delivery Hero and Meituan

The main advantage of trading using opposite Delivery Hero and Meituan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delivery Hero 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 Delivery Hero SE 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.