Correlation Between JD and CarPartsCom

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

Diversification Opportunities for JD and CarPartsCom

-0.08

Correlation Coefficient

JD  CarPartsCom

Good diversification

The 3 months correlation between JD and CarPartsCom is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding JD Inc Adr and CarPartsCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarPartsCom 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 CarPartsCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarPartsCom has no effect on the direction of JD i.e., JD and CarPartsCom go up and down completely randomly.

Pair Corralation between JD and CarPartsCom

Allowing for the 90-day total investment horizon JD Inc Adr is expected to generate 0.47 times more return on investment than CarPartsCom. However, JD Inc Adr is 2.15 times less risky than CarPartsCom. It trades about 0.13 of its potential returns per unit of risk. CarPartsCom is currently generating about 0.04 per unit of risk. If you would invest  3,426  in JD Inc Adr on December 28, 2024 and sell it today you would earn a total of  863.00  from holding JD Inc Adr or generate 25.19% 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.  CarPartsCom

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 10 (%) 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.

CarPartsCom

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CarPartsCom are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CarPartsCom unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JD and CarPartsCom

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

The idea behind JD Inc Adr and CarPartsCom 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.