Correlation Between JD and Oriental Culture

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

Diversification Opportunities for JD and Oriental Culture

0.11

Correlation Coefficient

JD  Oriental Culture

Average diversification

The 3 months correlation between JD and Oriental is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding JD Inc Adr and Oriental Culture Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Culture Holding 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 Oriental Culture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Culture Holding has no effect on the direction of JD i.e., JD and Oriental Culture go up and down completely randomly.

Pair Corralation between JD and Oriental Culture

Allowing for the 90-day total investment horizon JD Inc Adr is expected to generate 0.77 times more return on investment than Oriental Culture. However, JD Inc Adr is 1.29 times less risky than Oriental Culture. It trades about 0.13 of its potential returns per unit of risk. Oriental Culture Holding is currently generating about -0.02 per unit of risk. If you would invest  3,644  in JD Inc Adr on December 18, 2024 and sell it today you would earn a total of  877.00  from holding JD Inc Adr or generate 24.07% return on investment over 90 days.

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

JD Inc Adr  vs.  Oriental Culture Holding

JD Inc Adr

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JD Inc Adr are ranked lower than 9 (%) 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.

Oriental Culture Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oriental Culture Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Oriental Culture is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with JD and Oriental Culture

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

The idea behind JD Inc Adr and Oriental Culture Holding 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.