Correlation Between Chefs Warehouse and Dingdong ADR

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

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

Diversification Opportunities for Chefs Warehouse and Dingdong ADR

0.25

Correlation Coefficient

Chefs Warehouse  Dingdong ADR

Modest diversification

The 3 months correlation between Chefs and Dingdong is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding The Chefs Warehouse and Dingdong ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dingdong ADR and Chefs Warehouse 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 The Chefs Warehouse are associated (or correlated) with Dingdong ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dingdong ADR has no effect on the direction of Chefs Warehouse i.e., Chefs Warehouse and Dingdong ADR go up and down completely randomly.

Pair Corralation between Chefs Warehouse and Dingdong ADR

Given the investment horizon of 90 days The Chefs Warehouse is expected to generate 0.6 times more return on investment than Dingdong ADR. However, The Chefs Warehouse is 1.66 times less risky than Dingdong ADR. It trades about 0.01 of its potential returns per unit of risk. Dingdong ADR is currently generating about -0.11 per unit of risk. If you would invest  5,046  in The Chefs Warehouse on January 4, 2025 and sell it today you would lose (46.00) from holding The Chefs Warehouse or give up 0.91% of portfolio value over 90 days.

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

The Chefs Warehouse  vs.  Dingdong ADR

Chefs Warehouse

Risk-Adjusted Performance

Weak

Over the last 90 days The Chefs Warehouse has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Chefs Warehouse is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Dingdong ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dingdong ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in May 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Chefs Warehouse and Dingdong ADR

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

The idea behind The Chefs Warehouse and Dingdong ADR 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.