Correlation Between PDD Holdings and Kohls Corp

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

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

Diversification Opportunities for PDD Holdings and Kohls Corp

0.82

Correlation Coefficient

PDD Holdings  Kohls Corp

Very poor diversification

The 3 months correlation between PDD and Kohls is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding PDD Holdings and Kohls Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kohls Corp 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 Kohls Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kohls Corp has no effect on the direction of PDD Holdings i.e., PDD Holdings and Kohls Corp go up and down completely randomly.

Pair Corralation between PDD Holdings and Kohls Corp

Considering the 90-day investment horizon PDD Holdings is expected to generate 1.63 times more return on investment than Kohls Corp. However, PDD Holdings is 1.63 times more volatile than Kohls Corp. It trades about 0.03 of its potential returns per unit of risk. Kohls Corp is currently generating about -0.01 per unit of risk. If you would invest  9,656  in PDD Holdings on September 29, 2024 and sell it today you would earn a total of  89.00  from holding PDD Holdings or generate 0.92% return on investment over 90 days.

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

PDD Holdings  vs.  Kohls Corp

PDD Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PDD Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Kohls Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kohls Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with PDD Holdings and Kohls Corp

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

The idea behind PDD Holdings and Kohls Corp 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.