Correlation Between D MARKET and PDD Holdings

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

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

Diversification Opportunities for D MARKET and PDD Holdings

0.34

Correlation Coefficient

D MARKET  PDD Holdings

Weak diversification

The 3 months correlation between HEPS and PDD is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding D MARKET Electronic Services and PDD Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PDD Holdings and D MARKET 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 D MARKET Electronic Services 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 D MARKET i.e., D MARKET and PDD Holdings go up and down completely randomly.

Pair Corralation between D MARKET and PDD Holdings

Given the investment horizon of 90 days D MARKET Electronic Services is expected to under-perform the PDD Holdings. But the stock apears to be less risky and, when comparing its historical volatility, D MARKET Electronic Services is 1.09 times less risky than PDD Holdings. The stock trades about -0.05 of its potential returns per unit of risk. The PDD Holdings is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  9,887  in PDD Holdings on December 26, 2024 and sell it today you would earn a total of  2,638  from holding PDD Holdings or generate 26.68% return on investment over 90 days.

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

D MARKET Electronic Services  vs.  PDD Holdings

D MARKET Electronic

Risk-Adjusted Performance

Very Weak

Over the last 90 days D MARKET Electronic Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

PDD Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PDD Holdings are ranked lower than 11 (%) 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 D MARKET and PDD Holdings

The main advantage of trading using opposite D MARKET and PDD Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if D MARKET 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 D MARKET Electronic Services 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.

Check out your portfolio center.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.