Correlation Between JD and J Long

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

Diversification Opportunities for JD and J Long

0.38

Correlation Coefficient

JD  J Long

Weak diversification

The 3 months correlation between JD and J Long is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding JD Inc Adr and J Long Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on J Long Group 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 J Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of J Long Group has no effect on the direction of JD i.e., JD and J Long go up and down completely randomly.

Pair Corralation between JD and J Long

Allowing for the 90-day total investment horizon JD is expected to generate 3.85 times less return on investment than J Long. But when comparing it to its historical volatility, JD Inc Adr is 1.88 times less risky than J Long. It trades about 0.06 of its potential returns per unit of risk. J Long Group Limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  305.00  in J Long Group Limited on September 27, 2024 and sell it today you would earn a total of  40.00  from holding J Long Group Limited or generate 13.11% return on investment over 90 days.

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

JD Inc Adr  vs.  J Long Group Limited

JD Inc Adr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JD Inc Adr has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, JD is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

J Long Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in J Long Group Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, J Long disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JD and J Long

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

The idea behind JD Inc Adr and J Long Group Limited 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.