Correlation Between EBay and PDD Holdings

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

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

Diversification Opportunities for EBay and PDD Holdings

0.32

Correlation Coefficient

EBay  PDD Holdings

Weak diversification

The 3 months correlation between EBay and PDD is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding eBay Inc and PDD Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PDD Holdings and EBay 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 eBay Inc 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 EBay i.e., EBay and PDD Holdings go up and down completely randomly.

Pair Corralation between EBay and PDD Holdings

Given the investment horizon of 90 days eBay Inc is expected to generate 0.46 times more return on investment than PDD Holdings. However, eBay Inc is 2.19 times less risky than PDD Holdings. It trades about 0.12 of its potential returns per unit of risk. PDD Holdings is currently generating about -0.02 per unit of risk. If you would invest  4,083  in eBay Inc on September 27, 2024 and sell it today you would earn a total of  2,295  from holding eBay Inc or generate 56.21% return on investment over 90 days.

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

eBay Inc  vs.  PDD Holdings

eBay Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days eBay Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, EBay is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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 January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with EBay and PDD Holdings

The main advantage of trading using opposite EBay and PDD Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EBay 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 eBay Inc 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.