Correlation Between Weibo Corp and JD
Can any of the company-specific risk be diversified away by investing in both Weibo Corp 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 Weibo Corp and JD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Weibo Corp and JD Inc Adr, you can compare the effects of market volatilities on Weibo Corp 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 Weibo Corp with a short position of JD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weibo Corp and JD.
Diversification Opportunities for Weibo Corp and JD
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Weibo and JD is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Weibo Corp and JD Inc Adr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Inc Adr and Weibo Corp 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 Weibo Corp 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 Adr has no effect on the direction of Weibo Corp i.e., Weibo Corp and JD go up and down completely randomly.
Pair Corralation between Weibo Corp and JD
Allowing for the 90-day total investment horizon Weibo Corp is expected to under-perform the JD. In addition to that, Weibo Corp is 1.05 times more volatile than JD Inc Adr. It trades about -0.03 of its total potential returns per unit of risk. JD Inc Adr is currently generating about -0.03 per unit of volatility. If you would invest 5,912 in JD Inc Adr on January 24, 2024 and sell it today you would lose (3,213) from holding JD Inc Adr or give up 54.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Weibo Corp vs. JD Inc Adr
Performance |
| Timeline |
| Weibo Corp |
| JD Inc Adr |
Weibo Corp and JD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Weibo Corp and JD
The main advantage of trading using opposite Weibo Corp and JD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weibo Corp 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 Weibo Corp and JD Inc Adr 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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