Correlation Between JD and EverQuote
Can any of the company-specific risk be diversified away by investing in both JD and EverQuote 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 EverQuote 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 EverQuote Class A, you can compare the effects of market volatilities on JD and EverQuote 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 EverQuote. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD and EverQuote.
Diversification Opportunities for JD and EverQuote
Poor diversification
The 3 months correlation between JD and EverQuote is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding JD Inc Adr and EverQuote Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EverQuote Class A 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 EverQuote. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EverQuote Class A has no effect on the direction of JD i.e., JD and EverQuote go up and down completely randomly.
Pair Corralation between JD and EverQuote
Allowing for the 90-day total investment horizon JD is expected to generate 10.96 times less return on investment than EverQuote. But when comparing it to its historical volatility, JD Inc Adr is 1.5 times less risky than EverQuote. It trades about 0.03 of its potential returns per unit of risk. EverQuote Class A is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 721.00 in EverQuote Class A on January 19, 2024 and sell it today you would earn a total of 1,159 from holding EverQuote Class A or generate 160.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
JD Inc Adr vs. EverQuote Class A
Performance |
| Timeline |
| JD Inc Adr |
| EverQuote Class A |
JD and EverQuote Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JD and EverQuote
The main advantage of trading using opposite JD and EverQuote positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD position performs unexpectedly, EverQuote 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 EverQuote will offset losses from the drop in EverQuote's long position.The idea behind JD Inc Adr and EverQuote Class A 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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