Correlation Between De Grey and Meituan

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

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

Diversification Opportunities for De Grey and Meituan

-0.55

Correlation Coefficient

De Grey  Meituan

Excellent diversification

The 3 months correlation between DGD and Meituan is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding De Grey Mining and Meituan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meituan and De Grey 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 De Grey Mining 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 De Grey i.e., De Grey and Meituan go up and down completely randomly.

Pair Corralation between De Grey and Meituan

Assuming the 90 days trading horizon De Grey is expected to generate 1.75 times less return on investment than Meituan. But when comparing it to its historical volatility, De Grey Mining is 1.09 times less risky than Meituan. It trades about 0.06 of its potential returns per unit of risk. Meituan is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  855.00  in Meituan on October 9, 2024 and sell it today you would earn a total of  1,002  from holding Meituan or generate 117.19% return on investment over 90 days.

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

De Grey Mining  vs.  Meituan

De Grey Mining

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in De Grey Mining are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, De Grey unveiled solid returns over the last few months and may actually be approaching a breakup point.

Meituan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Meituan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with De Grey and Meituan

The main advantage of trading using opposite De Grey and Meituan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if De Grey 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 De Grey Mining 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.