Correlation Between Crocs and Pinduoduo

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

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

Diversification Opportunities for Crocs and Pinduoduo

-0.31

Correlation Coefficient

Crocs  Pinduoduo

Very good diversification

The 3 months correlation between Crocs and Pinduoduo is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Crocs Inc and Pinduoduo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinduoduo and Crocs 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 Crocs Inc 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 Crocs i.e., Crocs and Pinduoduo go up and down completely randomly.

Pair Corralation between Crocs and Pinduoduo

Given the investment horizon of 90 days Crocs Inc is expected to under-perform the Pinduoduo. But the stock apears to be less risky and, when comparing its historical volatility, Crocs Inc is 1.82 times less risky than Pinduoduo. The stock trades about -0.17 of its potential returns per unit of risk. The Pinduoduo is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  11,787  in Pinduoduo on February 5, 2024 and sell it today you would earn a total of  2,231  from holding Pinduoduo or generate 18.93% return on investment over 90 days.

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

Crocs Inc  vs.  Pinduoduo

Crocs Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Crocs Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Crocs showed solid returns over the last few months and may actually be approaching a breakup point.

Pinduoduo

Risk-Adjusted Performance

7 of 100

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. In spite of rather unsteady fundamental indicators, Pinduoduo exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Crocs and Pinduoduo

The main advantage of trading using opposite Crocs and Pinduoduo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crocs 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 Crocs Inc 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.