Correlation Between Chewy and JD

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

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

Diversification Opportunities for Chewy and JD

-0.11

Correlation Coefficient

Chewy  JD

Good diversification

The 3 months correlation between Chewy and JD is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Chewy Inc and JD Inc Adr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Inc Adr and Chewy 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 Chewy Inc are associated (or correlated) with JD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Inc Adr has no effect on the direction of Chewy i.e., Chewy and JD go up and down completely randomly.

Pair Corralation between Chewy and JD

Given the investment horizon of 90 days Chewy Inc is expected to generate 1.0 times more return on investment than JD. However, Chewy is 1.0 times more volatile than JD Inc Adr. It trades about 0.11 of its potential returns per unit of risk. JD Inc Adr is currently generating about 0.07 per unit of risk. If you would invest  2,226  in Chewy Inc on September 1, 2024 and sell it today you would earn a total of  1,115  from holding Chewy Inc or generate 50.09% return on investment over 90 days.

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

Chewy Inc  vs.  JD Inc Adr

Chewy Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chewy Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Chewy showed solid returns over the last few months and may actually be approaching a breakup point.

JD Inc Adr

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JD Inc Adr are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, JD exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chewy and JD

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

The idea behind Chewy Inc and JD Inc Adr 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 Stocks Directory module to find actively traded stocks across global markets.