Correlation Between JD and Biomm SA

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

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

Diversification Opportunities for JD and Biomm SA

-0.34

Correlation Coefficient

JD  Biomm SA

Very good diversification

The 3 months correlation between JD and Biomm is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding JD Inc and Biomm SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biomm SA 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 Biomm SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biomm SA has no effect on the direction of JD i.e., JD and Biomm SA go up and down completely randomly.

Pair Corralation between JD and Biomm SA

Assuming the 90 days trading horizon JD Inc is expected to generate 0.97 times more return on investment than Biomm SA. However, JD Inc is 1.03 times less risky than Biomm SA. It trades about 0.04 of its potential returns per unit of risk. Biomm SA is currently generating about 0.03 per unit of risk. If you would invest  3,776  in JD Inc on October 20, 2024 and sell it today you would earn a total of  154.00  from holding JD Inc or generate 4.08% return on investment over 90 days.

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

JD Inc  vs.  Biomm SA

JD Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JD Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, JD may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Biomm SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Biomm SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Biomm SA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with JD and Biomm SA

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

The idea behind JD Inc and Biomm SA 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.