Correlation Between JD and PDD Holdings

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

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

Diversification Opportunities for JD and PDD Holdings

0.88

Correlation Coefficient

JD  PDD Holdings

Very poor diversification

The 3 months correlation between JD and PDD is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding JD Inc Adr and PDD Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PDD Holdings and JD 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 JD Inc Adr 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 JD i.e., JD and PDD Holdings go up and down completely randomly.

Pair Corralation between JD and PDD Holdings

Allowing for the 90-day total investment horizon JD is expected to generate 1.46 times less return on investment than PDD Holdings. In addition to that, JD is 1.08 times more volatile than PDD Holdings. It trades about 0.1 of its total potential returns per unit of risk. PDD Holdings is currently generating about 0.16 per unit of volatility. If you would invest  9,887  in PDD Holdings on December 25, 2024 and sell it today you would earn a total of  2,925  from holding PDD Holdings or generate 29.58% return on investment over 90 days.

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

JD Inc Adr  vs.  PDD Holdings

JD Inc Adr

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JD Inc Adr are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, JD exhibited solid returns over the last few months and may actually be approaching a breakup point.

PDD Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PDD Holdings are ranked lower than 12 (%) 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 JD and PDD Holdings

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