Correlation Between Hour Loop and Dada Nexus

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

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

Diversification Opportunities for Hour Loop and Dada Nexus

0.24

Correlation Coefficient

Hour Loop  Dada Nexus

Modest diversification

The 3 months correlation between Hour and Dada is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Hour Loop and Dada Nexus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dada Nexus and Hour Loop 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 Hour Loop are associated (or correlated) with Dada Nexus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dada Nexus has no effect on the direction of Hour Loop i.e., Hour Loop and Dada Nexus go up and down completely randomly.

Pair Corralation between Hour Loop and Dada Nexus

Given the investment horizon of 90 days Hour Loop is expected to generate 1.57 times more return on investment than Dada Nexus. However, Hour Loop is 1.57 times more volatile than Dada Nexus. It trades about 0.08 of its potential returns per unit of risk. Dada Nexus is currently generating about -0.09 per unit of risk. If you would invest  132.00  in Hour Loop on September 5, 2024 and sell it today you would earn a total of  11.00  from holding Hour Loop or generate 8.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Hour Loop  vs.  Dada Nexus

Hour Loop

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hour Loop are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Hour Loop reported solid returns over the last few months and may actually be approaching a breakup point.

Dada Nexus

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Hour Loop and Dada Nexus

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

The idea behind Hour Loop and Dada Nexus 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 Anywhere module to track or share privately all of your investments from the convenience of any device.