Correlation Between El Pollo and Pinduoduo

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

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

Diversification Opportunities for El Pollo and Pinduoduo

0.79

Correlation Coefficient

El Pollo  Pinduoduo

Poor diversification

The 3 months correlation between LOCO and Pinduoduo is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding El Pollo Loco and Pinduoduo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinduoduo and El Pollo 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 El Pollo Loco are associated (or correlated) with Pinduoduo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinduoduo has no effect on the direction of El Pollo i.e., El Pollo and Pinduoduo go up and down completely randomly.

Pair Corralation between El Pollo and Pinduoduo

Given the investment horizon of 90 days El Pollo Loco is expected to generate 1.14 times more return on investment than Pinduoduo. However, El Pollo is 1.14 times more volatile than Pinduoduo. It trades about 0.25 of its potential returns per unit of risk. Pinduoduo is currently generating about 0.07 per unit of risk. If you would invest  852.00  in El Pollo Loco on March 31, 2024 and sell it today you would earn a total of  279.00  from holding El Pollo Loco or generate 32.75% return on investment over 90 days.

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

El Pollo Loco  vs.  Pinduoduo

El Pollo Loco

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in El Pollo Loco are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, El Pollo displayed solid returns over the last few months and may actually be approaching a breakup point.

Pinduoduo

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pinduoduo are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Pinduoduo exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with El Pollo and Pinduoduo

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

The idea behind El Pollo Loco and Pinduoduo 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.