Correlation Between Revolve Group and PDD Holdings

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

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

Diversification Opportunities for Revolve Group and PDD Holdings

-0.68

Correlation Coefficient

Revolve Group  PDD Holdings

Excellent diversification

The 3 months correlation between Revolve and PDD is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Revolve Group LLC and PDD Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PDD Holdings and Revolve Group 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 Revolve Group LLC are associated (or correlated) with PDD Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PDD Holdings has no effect on the direction of Revolve Group i.e., Revolve Group and PDD Holdings go up and down completely randomly.

Pair Corralation between Revolve Group and PDD Holdings

Given the investment horizon of 90 days Revolve Group LLC is expected to under-perform the PDD Holdings. In addition to that, Revolve Group is 1.05 times more volatile than PDD Holdings. It trades about -0.18 of its total potential returns per unit of risk. PDD Holdings is currently generating about 0.14 per unit of volatility. If you would invest  9,745  in PDD Holdings on December 27, 2024 and sell it today you would earn a total of  2,502  from holding PDD Holdings or generate 25.67% return on investment over 90 days.

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

Revolve Group LLC  vs.  PDD Holdings

Revolve Group LLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Revolve Group LLC 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 essential indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

PDD Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PDD Holdings are ranked lower than 10 (%) 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.

Pair Trading with Revolve Group and PDD Holdings

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

The idea behind Revolve Group LLC and PDD Holdings 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.