# Correlation Between PDD Holdings and Chevron Corp

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Can any of the company-specific risk be diversified away by investing in both PDD Holdings and Chevron Corp 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 Chevron Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PDD Holdings and Chevron Corp, you can compare the effects of market volatilities on PDD Holdings and Chevron Corp 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 Chevron Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of PDD Holdings and Chevron Corp.

## Diversification Opportunities for PDD Holdings and Chevron Corp

 0.17 Correlation Coefficient

### Average diversification

The 3 months correlation between PDD and Chevron is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding PDD Holdings and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp 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 Chevron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron Corp has no effect on the direction of PDD Holdings i.e., PDD Holdings and Chevron Corp go up and down completely randomly.

## Pair Corralation between PDD Holdings and Chevron Corp

Considering the 90-day investment horizon PDD Holdings is expected to generate 1.35 times more return on investment than Chevron Corp. However, PDD Holdings is 1.35 times more volatile than Chevron Corp. It trades about 0.01 of its potential returns per unit of risk. Chevron Corp is currently generating about -0.18 per unit of risk. If you would invest  13,807  in PDD Holdings on May 11, 2024 and sell it today you would lose (5.00) from holding PDD Holdings or give up 0.04% of portfolio value over 90 days.
 Time Period 3 Months [change] Direction Moves Together Strength Insignificant Accuracy 100.0% Values Daily Returns

## PDD Holdings  vs.  Chevron Corp

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 Timeline
 PDD Holdings Correlation Profile

### 0 of 100

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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 rather sound fundamental indicators, PDD Holdings is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.
 Performance Backtest Predict
 Chevron Corp Correlation Profile

### 0 of 100

 Weak Strong
Very Weak
Over the last 90 days Chevron Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
 Performance Backtest Predict

## PDD Holdings and Chevron Corp Volatility Contrast

 Predicted Return Density
 Returns

## Pair Trading with PDD Holdings and Chevron Corp

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