Correlation Between Dassault Systemes and Meituan

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

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

Diversification Opportunities for Dassault Systemes and Meituan

-0.83

Correlation Coefficient

Dassault Systemes  Meituan

Pay attention - limited upside

The 3 months correlation between Dassault and Meituan is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Dassault Systemes SA and Meituan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meituan and Dassault Systemes 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 Dassault Systemes SA are associated (or correlated) with Meituan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meituan has no effect on the direction of Dassault Systemes i.e., Dassault Systemes and Meituan go up and down completely randomly.

Pair Corralation between Dassault Systemes and Meituan

Assuming the 90 days horizon Dassault Systemes SA is expected to under-perform the Meituan. But the pink sheet apears to be less risky and, when comparing its historical volatility, Dassault Systemes SA is 2.88 times less risky than Meituan. The pink sheet trades about -0.24 of its potential returns per unit of risk. The Meituan is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,261  in Meituan on February 3, 2024 and sell it today you would earn a total of  287.00  from holding Meituan or generate 22.76% return on investment over 90 days.

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

Dassault Systemes SA  vs.  Meituan

Dassault Systemes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dassault Systemes SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Meituan

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Meituan are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical and fundamental indicators, Meituan reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dassault Systemes and Meituan

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

The idea behind Dassault Systemes SA and Meituan 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.