Correlation Between JD and Brookfield

Can any of the company-specific risk be diversified away by investing in both JD and Brookfield 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 Brookfield into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between JD Inc and Brookfield, you can compare the effects of market volatilities on JD and Brookfield 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 Brookfield. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD and Brookfield.

Diversification Opportunities for JD and Brookfield

-0.31

Correlation Coefficient

JD  Brookfield

Very good diversification

The 3 months correlation between JD and Brookfield is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding JD Inc and Brookfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield 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 are associated (or correlated) with Brookfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield has no effect on the direction of JD i.e., JD and Brookfield go up and down completely randomly.

Pair Corralation between JD and Brookfield

Assuming the 90 days trading horizon JD Inc is expected to generate 1.86 times more return on investment than Brookfield. However, JD is 1.86 times more volatile than Brookfield. It trades about 0.09 of its potential returns per unit of risk. Brookfield is currently generating about 0.13 per unit of risk. If you would invest  1,967  in JD Inc on October 8, 2024 and sell it today you would earn a total of  1,700  from holding JD Inc or generate 86.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.19%
Values	Daily Returns

JD Inc  vs.  Brookfield

JD Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JD Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, JD is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Brookfield

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Brookfield sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JD and Brookfield

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

The idea behind JD Inc and Brookfield 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.