Correlation Between JD and Alphabet
Can any of the company-specific risk be diversified away by investing in both JD and Alphabet 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 Alphabet 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 Alphabet Inc Class C, you can compare the effects of market volatilities on JD and Alphabet 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 Alphabet. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD and Alphabet.
Diversification Opportunities for JD and Alphabet
Very weak diversification
The 3 months correlation between JD and Alphabet is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding JD Inc Adr and Alphabet Inc Class C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Class C 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 Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet Class C has no effect on the direction of JD i.e., JD and Alphabet go up and down completely randomly.
Pair Corralation between JD and Alphabet
Allowing for the 90-day total investment horizon JD Inc Adr is expected to generate 1.79 times more return on investment than Alphabet. However, JD is 1.79 times more volatile than Alphabet Inc Class C. It trades about 0.21 of its potential returns per unit of risk. Alphabet Inc Class C is currently generating about 0.23 per unit of risk. If you would invest 2,564 in JD Inc Adr on January 26, 2024 and sell it today you would earn a total of 263.00 from holding JD Inc Adr or generate 10.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
JD Inc Adr vs. Alphabet Inc Class C
Performance |
| Timeline |
| JD Inc Adr |
| Alphabet Class C |
JD and Alphabet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JD and Alphabet
The main advantage of trading using opposite JD and Alphabet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD position performs unexpectedly, Alphabet 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 Alphabet will offset losses from the drop in Alphabet's long position.The idea behind JD Inc Adr and Alphabet Inc Class C 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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