Correlation Between Sea and JD

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

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

Diversification Opportunities for Sea and JD

0.34

Correlation Coefficient

Sea  JD

Weak diversification

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

Pair Corralation between Sea and JD

Assuming the 90 days trading horizon Sea is expected to generate 2.57 times less return on investment than JD. But when comparing it to its historical volatility, Sea Limited is 1.7 times less risky than JD. It trades about 0.05 of its potential returns per unit of risk. JD Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,582  in JD Inc on December 4, 2024 and sell it today you would earn a total of  510.00  from holding JD Inc or generate 14.24% return on investment over 90 days.

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

Sea Limited  vs.  JD Inc

Sea Limited

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sea Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Sea may actually be approaching a critical reversion point that can send shares even higher in April 2025.

JD Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in JD Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, JD sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sea and JD

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

The idea behind Sea Limited and JD Inc 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.

Check out your portfolio center.

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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.