Correlation Between Advanced Information and JD Food

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

By analyzing existing cross correlation between Advanced Information Technology and JD Food PCL, you can compare the effects of market volatilities on Advanced Information and JD Food 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 Advanced Information with a short position of JD Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Information and JD Food.

Diversification Opportunities for Advanced Information and JD Food

0.04

Correlation Coefficient

Advanced Information  JD Food

Significant diversification

The 3 months correlation between Advanced and JDF is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Information Technolog and JD Food PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Food PCL and Advanced Information 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 Advanced Information Technology are associated (or correlated) with JD Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Food PCL has no effect on the direction of Advanced Information i.e., Advanced Information and JD Food go up and down completely randomly.

Pair Corralation between Advanced Information and JD Food

Assuming the 90 days trading horizon Advanced Information Technology is expected to generate 1.44 times more return on investment than JD Food. However, Advanced Information is 1.44 times more volatile than JD Food PCL. It trades about 0.08 of its potential returns per unit of risk. JD Food PCL is currently generating about 0.02 per unit of risk. If you would invest  432.00  in Advanced Information Technology on December 2, 2024 and sell it today you would earn a total of  16.00  from holding Advanced Information Technology or generate 3.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Advanced Information Technolog  vs.  JD Food PCL

Advanced Information

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Information Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Advanced Information is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

JD Food PCL

Risk-Adjusted Performance

Very Weak

Over the last 90 days JD Food PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, JD Food is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Advanced Information and JD Food

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

The idea behind Advanced Information Technology and JD Food PCL 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..