Correlation Between PDD Holdings and ZKH Group

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

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

Diversification Opportunities for PDD Holdings and ZKH Group

0.71

Correlation Coefficient

PDD Holdings  ZKH Group

Poor diversification

The 3 months correlation between PDD and ZKH is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding PDD Holdings and ZKH Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZKH Group 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 ZKH Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZKH Group Limited has no effect on the direction of PDD Holdings i.e., PDD Holdings and ZKH Group go up and down completely randomly.

Pair Corralation between PDD Holdings and ZKH Group

Considering the 90-day investment horizon PDD Holdings is expected to generate 0.6 times more return on investment than ZKH Group. However, PDD Holdings is 1.68 times less risky than ZKH Group. It trades about 0.02 of its potential returns per unit of risk. ZKH Group Limited is currently generating about -0.05 per unit of risk. If you would invest  9,715  in PDD Holdings on October 21, 2024 and sell it today you would earn a total of  842.00  from holding PDD Holdings or generate 8.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	55.24%
Values	Daily Returns

PDD Holdings  vs.  ZKH Group Limited

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 February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

ZKH Group Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZKH Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward-looking signals, ZKH Group is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with PDD Holdings and ZKH Group

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

The idea behind PDD Holdings and ZKH Group 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.