Correlation Between TripAdvisor and PDD Holdings

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

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

Diversification Opportunities for TripAdvisor and PDD Holdings

0.42

Correlation Coefficient

TripAdvisor  PDD Holdings

Very weak diversification

The 3 months correlation between TripAdvisor and PDD is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding TripAdvisor and PDD Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PDD Holdings and TripAdvisor 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 TripAdvisor are associated (or correlated) with PDD Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PDD Holdings has no effect on the direction of TripAdvisor i.e., TripAdvisor and PDD Holdings go up and down completely randomly.

Pair Corralation between TripAdvisor and PDD Holdings

Given the investment horizon of 90 days TripAdvisor is expected to generate 1.54 times more return on investment than PDD Holdings. However, TripAdvisor is 1.54 times more volatile than PDD Holdings. It trades about 0.1 of its potential returns per unit of risk. PDD Holdings is currently generating about -0.01 per unit of risk. If you would invest  1,494  in TripAdvisor on May 17, 2025 and sell it today you would earn a total of  309.00  from holding TripAdvisor or generate 20.68% return on investment over 90 days.

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

TripAdvisor  vs.  PDD Holdings

TripAdvisor

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in TripAdvisor are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady forward indicators, TripAdvisor reported solid returns over the last few months and may actually be approaching a breakup point.

PDD Holdings

Risk-Adjusted Performance

Weakest

Over the last 90 days PDD Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, PDD Holdings is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with TripAdvisor and PDD Holdings

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

The idea behind TripAdvisor and PDD Holdings 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.