Correlation Between Dada Nexus and Jumia Technologies

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

By analyzing existing cross correlation between Dada Nexus and Jumia Technologies AG, you can compare the effects of market volatilities on Dada Nexus and Jumia Technologies 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 Dada Nexus with a short position of Jumia Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dada Nexus and Jumia Technologies.

Diversification Opportunities for Dada Nexus and Jumia Technologies

0.75

Correlation Coefficient

Dada Nexus  Jumia Technologies

Poor diversification

The 3 months correlation between Dada and Jumia is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Dada Nexus and Jumia Technologies AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jumia Technologies and Dada Nexus 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 Dada Nexus are associated (or correlated) with Jumia Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jumia Technologies has no effect on the direction of Dada Nexus i.e., Dada Nexus and Jumia Technologies go up and down completely randomly.

Pair Corralation between Dada Nexus and Jumia Technologies

Given the investment horizon of 90 days Dada Nexus is expected to under-perform the Jumia Technologies. In addition to that, Dada Nexus is 1.11 times more volatile than Jumia Technologies AG. It trades about -0.01 of its total potential returns per unit of risk. Jumia Technologies AG is currently generating about 0.01 per unit of volatility. If you would invest  761.00  in Jumia Technologies AG on January 17, 2024 and sell it today you would lose (347.00) from holding Jumia Technologies AG or give up 45.6% of portfolio value over 90 days.

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

Dada Nexus  vs.  Jumia Technologies AG

Dada Nexus

Risk-Adjusted Performance

6 of 100

OK

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

Jumia Technologies

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jumia Technologies AG are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating forward indicators, Jumia Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dada Nexus and Jumia Technologies

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

The idea behind Dada Nexus and Jumia Technologies AG 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.