Correlation Between PDD Holdings and EBay

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

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

Diversification Opportunities for PDD Holdings and EBay

-0.75

Correlation Coefficient

PDD Holdings  EBay

Pay attention - limited upside

The 3 months correlation between PDD and EBay is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding PDD Holdings and eBay Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eBay Inc and PDD Holdings 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 PDD Holdings are associated (or correlated) with EBay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eBay Inc has no effect on the direction of PDD Holdings i.e., PDD Holdings and EBay go up and down completely randomly.

Pair Corralation between PDD Holdings and EBay

Considering the 90-day investment horizon PDD Holdings is expected to generate 2.14 times more return on investment than EBay. However, PDD Holdings is 2.14 times more volatile than eBay Inc. It trades about 0.04 of its potential returns per unit of risk. eBay Inc is currently generating about 0.08 per unit of risk. If you would invest  6,258  in PDD Holdings on June 21, 2024 and sell it today you would earn a total of  3,565  from holding PDD Holdings or generate 56.97% return on investment over 90 days.

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

PDD Holdings  vs.  eBay Inc

PDD Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PDD Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in October 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

eBay Inc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in eBay Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, EBay showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PDD Holdings and EBay

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

The idea behind PDD Holdings and eBay Inc 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.