Correlation Between PDD Holdings and Redbubble

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

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

Diversification Opportunities for PDD Holdings and Redbubble

-0.51

Correlation Coefficient

PDD Holdings  Redbubble

Excellent diversification

The 3 months correlation between PDD and Redbubble is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding PDD Holdings and Redbubble Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redbubble Limited 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 Redbubble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redbubble Limited has no effect on the direction of PDD Holdings i.e., PDD Holdings and Redbubble go up and down completely randomly.

Pair Corralation between PDD Holdings and Redbubble

Considering the 90-day investment horizon PDD Holdings is expected to generate 0.41 times more return on investment than Redbubble. However, PDD Holdings is 2.44 times less risky than Redbubble. It trades about 0.14 of its potential returns per unit of risk. Redbubble Limited is currently generating about -0.02 per unit of risk. If you would invest  9,439  in PDD Holdings on December 28, 2024 and sell it today you would earn a total of  2,606  from holding PDD Holdings or generate 27.61% return on investment over 90 days.

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

PDD Holdings  vs.  Redbubble Limited

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.

Redbubble Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Redbubble Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with PDD Holdings and Redbubble

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

The idea behind PDD Holdings and Redbubble Limited 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.