Correlation Between Pinduoduo and Mead Johnson

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

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

Diversification Opportunities for Pinduoduo and Mead Johnson

0.0

Correlation Coefficient

Pinduoduo  Mead Johnson

Pay attention - limited upside

The 3 months correlation between Pinduoduo and Mead is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Pinduoduo and Mead Johnson Nutrition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mead Johnson Nutrition and Pinduoduo 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 Pinduoduo are associated (or correlated) with Mead Johnson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mead Johnson Nutrition has no effect on the direction of Pinduoduo i.e., Pinduoduo and Mead Johnson go up and down completely randomly.

Pair Corralation between Pinduoduo and Mead Johnson

If you would invest  12,212  in Pinduoduo on February 3, 2024 and sell it today you would earn a total of  1,542  from holding Pinduoduo or generate 12.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Pinduoduo  vs.  Mead Johnson Nutrition

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 uncertain fundamental indicators, Pinduoduo exhibited solid returns over the last few months and may actually be approaching a breakup point.

Mead Johnson Nutrition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mead Johnson Nutrition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking indicators, Mead Johnson is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Pinduoduo and Mead Johnson

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

The idea behind Pinduoduo and Mead Johnson Nutrition 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 Global Correlations module to find global opportunities by holding instruments from different markets.