Correlation Between JD Sports and NetEase

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

By analyzing existing cross correlation between JD Sports Fashion and NetEase, you can compare the effects of market volatilities on JD Sports and NetEase 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 Sports with a short position of NetEase. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD Sports and NetEase.

Diversification Opportunities for JD Sports and NetEase

-0.16

Correlation Coefficient

JD Sports  NetEase

Good diversification

The 3 months correlation between JDSPY and NetEase is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase and JD Sports 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 Sports Fashion are associated (or correlated) with NetEase. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetEase has no effect on the direction of JD Sports i.e., JD Sports and NetEase go up and down completely randomly.

Pair Corralation between JD Sports and NetEase

Assuming the 90 days horizon JD Sports Fashion is expected to under-perform the NetEase. In addition to that, JD Sports is 1.54 times more volatile than NetEase. It trades about -0.01 of its total potential returns per unit of risk. NetEase is currently generating about -0.01 per unit of volatility. If you would invest  10,554  in NetEase on October 5, 2024 and sell it today you would lose (1,729) from holding NetEase or give up 16.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.68%
Values	Daily Returns

JD Sports Fashion  vs.  NetEase

JD Sports Fashion

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JD Sports Fashion has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

NetEase

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NetEase has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with JD Sports and NetEase

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

The idea behind JD Sports Fashion and NetEase 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.