Correlation Between PDD Holdings and Etsy

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

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

Diversification Opportunities for PDD Holdings and Etsy

-0.22

Correlation Coefficient

PDD Holdings  Etsy

Very good diversification

The 3 months correlation between PDD and Etsy is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding PDD Holdings and Etsy Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Etsy Inc and PDD Holdings 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 PDD Holdings are associated (or correlated) with Etsy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Etsy Inc has no effect on the direction of PDD Holdings i.e., PDD Holdings and Etsy go up and down completely randomly.

Pair Corralation between PDD Holdings and Etsy

Considering the 90-day investment horizon PDD Holdings is expected to generate 1.29 times more return on investment than Etsy. However, PDD Holdings is 1.29 times more volatile than Etsy Inc. It trades about 0.04 of its potential returns per unit of risk. Etsy Inc is currently generating about -0.04 per unit of risk. If you would invest  8,773  in PDD Holdings on November 19, 2024 and sell it today you would earn a total of  3,643  from holding PDD Holdings or generate 41.53% return on investment over 90 days.

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

PDD Holdings  vs.  Etsy Inc

PDD Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PDD Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, PDD Holdings may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Etsy Inc

Risk-Adjusted Performance

OK

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

Pair Trading with PDD Holdings and Etsy

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

The idea behind PDD Holdings and Etsy Inc 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.