Correlation Between Delivery Hero and PDD Holdings

Can any of the company-specific risk be diversified away by investing in both Delivery Hero 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 Delivery Hero and PDD Holdings 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 PDD Holdings, you can compare the effects of market volatilities on Delivery Hero 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 Delivery Hero with a short position of PDD Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delivery Hero and PDD Holdings.

Diversification Opportunities for Delivery Hero and PDD Holdings

-0.2

Correlation Coefficient

Delivery Hero  PDD Holdings

Good diversification

The 3 months correlation between Delivery and PDD is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Delivery Hero SE and PDD Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PDD Holdings 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 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 Delivery Hero i.e., Delivery Hero and PDD Holdings go up and down completely randomly.

Pair Corralation between Delivery Hero and PDD Holdings

Assuming the 90 days horizon Delivery Hero SE is expected to generate 1.12 times more return on investment than PDD Holdings. However, Delivery Hero is 1.12 times more volatile than PDD Holdings. It trades about 0.1 of its potential returns per unit of risk. PDD Holdings is currently generating about 0.09 per unit of risk. If you would invest  265.00  in Delivery Hero SE on November 29, 2024 and sell it today you would earn a total of  19.00  from holding Delivery Hero SE or generate 7.17% return on investment over 90 days.

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

Delivery Hero SE  vs.  PDD Holdings

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 weak performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

PDD Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PDD Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, PDD Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Delivery Hero and PDD Holdings

The main advantage of trading using opposite Delivery Hero and PDD Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delivery Hero 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 Delivery Hero SE 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.