Correlation Between JD and Advance Auto

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

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

Diversification Opportunities for JD and Advance Auto

-0.47

Correlation Coefficient

JD  Advance Auto

Very good diversification

The 3 months correlation between JD and Advance is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding JD Inc Adr and Advance Auto Parts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advance Auto Parts and JD 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 JD Inc Adr are associated (or correlated) with Advance Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advance Auto Parts has no effect on the direction of JD i.e., JD and Advance Auto go up and down completely randomly.

Pair Corralation between JD and Advance Auto

Allowing for the 90-day total investment horizon JD Inc Adr is expected to generate 0.98 times more return on investment than Advance Auto. However, JD Inc Adr is 1.03 times less risky than Advance Auto. It trades about 0.08 of its potential returns per unit of risk. Advance Auto Parts is currently generating about -0.06 per unit of risk. If you would invest  3,613  in JD Inc Adr on December 26, 2024 and sell it today you would earn a total of  534.00  from holding JD Inc Adr or generate 14.78% return on investment over 90 days.

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

JD Inc Adr  vs.  Advance Auto Parts

JD Inc Adr

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JD Inc Adr are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, JD exhibited solid returns over the last few months and may actually be approaching a breakup point.

Advance Auto Parts

Risk-Adjusted Performance

Very Weak

Over the last 90 days Advance Auto Parts has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with JD and Advance Auto

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

The idea behind JD Inc Adr and Advance Auto Parts 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.