Correlation Between Penta-Ocean Construction and Pinduoduo

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

By analyzing existing cross correlation between Penta Ocean Construction Co and Pinduoduo, you can compare the effects of market volatilities on Penta-Ocean Construction and Pinduoduo 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 Penta-Ocean Construction with a short position of Pinduoduo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penta-Ocean Construction and Pinduoduo.

Diversification Opportunities for Penta-Ocean Construction and Pinduoduo

0.79

Correlation Coefficient

Penta-Ocean Construction  Pinduoduo

Poor diversification

The 3 months correlation between Penta-Ocean and Pinduoduo is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Penta Ocean Construction Co and Pinduoduo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinduoduo and Penta-Ocean Construction 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 Penta Ocean Construction Co are associated (or correlated) with Pinduoduo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinduoduo has no effect on the direction of Penta-Ocean Construction i.e., Penta-Ocean Construction and Pinduoduo go up and down completely randomly.

Pair Corralation between Penta-Ocean Construction and Pinduoduo

Assuming the 90 days horizon Penta-Ocean Construction is expected to generate 1.93 times less return on investment than Pinduoduo. But when comparing it to its historical volatility, Penta Ocean Construction Co is 1.71 times less risky than Pinduoduo. It trades about 0.08 of its potential returns per unit of risk. Pinduoduo is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  9,400  in Pinduoduo on December 2, 2024 and sell it today you would earn a total of  1,650  from holding Pinduoduo or generate 17.55% return on investment over 90 days.

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

Penta Ocean Construction Co  vs.  Pinduoduo

Penta-Ocean Construction

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Penta Ocean Construction Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Penta-Ocean Construction may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pinduoduo

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pinduoduo are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain fundamental indicators, Pinduoduo reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penta-Ocean Construction and Pinduoduo

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

The idea behind Penta Ocean Construction Co and Pinduoduo 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.