Correlation Between Workiva and Meituan
Can any of the company-specific risk be diversified away by investing in both Workiva 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 Workiva and Meituan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Workiva and Meituan, you can compare the effects of market volatilities on Workiva 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 Workiva with a short position of Meituan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Workiva and Meituan.
Diversification Opportunities for Workiva and Meituan
Pay attention - limited upside
The 3 months correlation between Workiva and Meituan is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Workiva and Meituan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meituan and Workiva 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 Workiva 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 Workiva i.e., Workiva and Meituan go up and down completely randomly.
Pair Corralation between Workiva and Meituan
Allowing for the 90-day total investment horizon Workiva is expected to generate 3.55 times less return on investment than Meituan. But when comparing it to its historical volatility, Workiva is 3.24 times less risky than Meituan. It trades about 0.18 of its potential returns per unit of risk. Meituan is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,285 in Meituan on February 13, 2024 and sell it today you would earn a total of 234.00 from holding Meituan or generate 18.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Workiva vs. Meituan
Performance |
| Timeline |
| Workiva |
| Meituan |
Workiva and Meituan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Workiva and Meituan
The main advantage of trading using opposite Workiva and Meituan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Workiva 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 Workiva 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.| Meituan vs. Aquagold International | Meituan vs. Morningstar Unconstrained Allocation | Meituan vs. High Yield Municipal Fund | Meituan vs. Thrivent High Yield |
Check out your portfolio center.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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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