Correlation Between JD and Emerge Commerce

Can any of the company-specific risk be diversified away by investing in both JD and Emerge Commerce 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 Emerge Commerce 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 Emerge Commerce, you can compare the effects of market volatilities on JD and Emerge Commerce 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 Emerge Commerce. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD and Emerge Commerce.

Diversification Opportunities for JD and Emerge Commerce

-0.26

Correlation Coefficient

JD  Emerge Commerce

Very good diversification

The 3 months correlation between JD and Emerge is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding JD Inc Adr and Emerge Commerce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerge Commerce 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 Emerge Commerce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerge Commerce has no effect on the direction of JD i.e., JD and Emerge Commerce go up and down completely randomly.

Pair Corralation between JD and Emerge Commerce

Allowing for the 90-day total investment horizon JD is expected to generate 23.07 times less return on investment than Emerge Commerce. But when comparing it to its historical volatility, JD Inc Adr is 30.48 times less risky than Emerge Commerce. It trades about 0.15 of its potential returns per unit of risk. Emerge Commerce is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2.50  in Emerge Commerce on September 3, 2024 and sell it today you would earn a total of  0.01  from holding Emerge Commerce or generate 0.4% return on investment over 90 days.

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

JD Inc Adr  vs.  Emerge Commerce

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.

Emerge Commerce

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emerge Commerce are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent primary indicators, Emerge Commerce reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JD and Emerge Commerce

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

The idea behind JD Inc Adr and Emerge Commerce 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.