Correlation Between Oriental Culture and Meituan ADR

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

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

Diversification Opportunities for Oriental Culture and Meituan ADR

0.33

Correlation Coefficient

Oriental Culture  Meituan ADR

Weak diversification

The 3 months correlation between Oriental and Meituan is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Oriental Culture Holding and Meituan ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meituan ADR and Oriental Culture 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 Oriental Culture Holding are associated (or correlated) with Meituan ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meituan ADR has no effect on the direction of Oriental Culture i.e., Oriental Culture and Meituan ADR go up and down completely randomly.

Pair Corralation between Oriental Culture and Meituan ADR

Considering the 90-day investment horizon Oriental Culture Holding is expected to generate 2.08 times more return on investment than Meituan ADR. However, Oriental Culture is 2.08 times more volatile than Meituan ADR. It trades about 0.16 of its potential returns per unit of risk. Meituan ADR is currently generating about 0.06 per unit of risk. If you would invest  117.00  in Oriental Culture Holding on December 29, 2024 and sell it today you would earn a total of  82.00  from holding Oriental Culture Holding or generate 70.09% return on investment over 90 days.

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

Oriental Culture Holding  vs.  Meituan ADR

Oriental Culture Holding

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oriental Culture Holding are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Oriental Culture reported solid returns over the last few months and may actually be approaching a breakup point.

Meituan ADR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Meituan ADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Meituan ADR may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Oriental Culture and Meituan ADR

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

The idea behind Oriental Culture Holding and Meituan ADR 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.