Correlation Between JD and Jumia Technologies

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

Diversification Opportunities for JD and Jumia Technologies

0.4

Correlation Coefficient

JD  Jumia Technologies

Very weak diversification

The 3 months correlation between JD and Jumia is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding JD Inc Adr and Jumia Technologies AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jumia Technologies 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 Jumia Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jumia Technologies has no effect on the direction of JD i.e., JD and Jumia Technologies go up and down completely randomly.

Pair Corralation between JD and Jumia Technologies

Allowing for the 90-day total investment horizon JD Inc Adr is expected to generate 0.93 times more return on investment than Jumia Technologies. However, JD Inc Adr is 1.07 times less risky than Jumia Technologies. It trades about 0.14 of its potential returns per unit of risk. Jumia Technologies AG is currently generating about -0.05 per unit of risk. If you would invest  2,700  in JD Inc Adr on August 30, 2024 and sell it today you would earn a total of  1,019  from holding JD Inc Adr or generate 37.74% return on investment over 90 days.

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

JD Inc Adr  vs.  Jumia Technologies AG

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.

Jumia Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jumia Technologies AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with JD and Jumia Technologies

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

The idea behind JD Inc Adr and Jumia Technologies AG 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.