Correlation Between Central Retail and JD Food

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

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

Diversification Opportunities for Central Retail and JD Food

-0.11

Correlation Coefficient

Central Retail  JD Food

Good diversification

The 3 months correlation between Central and JDF is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Central Retail 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 Central Retail 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 Central Retail 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 Central Retail i.e., Central Retail and JD Food go up and down completely randomly.

Pair Corralation between Central Retail and JD Food

Assuming the 90 days trading horizon Central Retail is expected to generate 1.16 times more return on investment than JD Food. However, Central Retail is 1.16 times more volatile than JD Food PCL. It trades about 0.05 of its potential returns per unit of risk. JD Food PCL is currently generating about -0.07 per unit of risk. If you would invest  3,225  in Central Retail on September 14, 2024 and sell it today you would earn a total of  150.00  from holding Central Retail or generate 4.65% return on investment over 90 days.

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

Central Retail  vs.  JD Food PCL

Central Retail

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Central Retail are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Central Retail is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

JD Food PCL

Risk-Adjusted Performance

0 of 100

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 latest conflicting performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Central Retail and JD Food

The main advantage of trading using opposite Central Retail and JD Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Retail 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 Central Retail 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.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.