Correlation Between EBay and Pinduoduo

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

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

Diversification Opportunities for EBay and Pinduoduo

-0.32

Correlation Coefficient

EBay  Pinduoduo

Very good diversification

The 3 months correlation between EBay and Pinduoduo is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding eBay Inc and Pinduoduo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinduoduo 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 Pinduoduo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinduoduo has no effect on the direction of EBay i.e., EBay and Pinduoduo go up and down completely randomly.

Pair Corralation between EBay and Pinduoduo

Assuming the 90 days trading horizon eBay Inc is expected to generate 0.85 times more return on investment than Pinduoduo. However, eBay Inc is 1.18 times less risky than Pinduoduo. It trades about 0.17 of its potential returns per unit of risk. Pinduoduo is currently generating about -0.05 per unit of risk. If you would invest  17,992  in eBay Inc on October 11, 2024 and sell it today you would earn a total of  3,155  from holding eBay Inc or generate 17.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.37%
Values	Daily Returns

eBay Inc  vs.  Pinduoduo

eBay Inc

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days eBay Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak basic indicators, EBay sustained solid returns over the last few months and may actually be approaching a breakup point.

Pinduoduo

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with EBay and Pinduoduo

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

The idea behind eBay Inc and Pinduoduo 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.