Correlation Between JD and GEAR4MUSIC
Can any of the company-specific risk be diversified away by investing in both JD and GEAR4MUSIC 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 GEAR4MUSIC 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 GEAR4MUSIC LS 10, you can compare the effects of market volatilities on JD and GEAR4MUSIC 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 GEAR4MUSIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD and GEAR4MUSIC.
Diversification Opportunities for JD and GEAR4MUSIC
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between JD and GEAR4MUSIC is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding JD Inc Adr and GEAR4MUSIC LS 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEAR4MUSIC LS 10 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 GEAR4MUSIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEAR4MUSIC LS 10 has no effect on the direction of JD i.e., JD and GEAR4MUSIC go up and down completely randomly.
Pair Corralation between JD and GEAR4MUSIC
Assuming the 90 days trading horizon JD Inc Adr is expected to generate 1.45 times more return on investment than GEAR4MUSIC. However, JD is 1.45 times more volatile than GEAR4MUSIC LS 10. It trades about 0.11 of its potential returns per unit of risk. GEAR4MUSIC LS 10 is currently generating about 0.05 per unit of risk. If you would invest 1,906 in JD Inc Adr on September 1, 2024 and sell it today you would earn a total of 1,629 from holding JD Inc Adr or generate 85.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.48% |
| Values | Daily Returns |
JD Inc Adr vs. GEAR4MUSIC LS 10
Performance |
| Timeline |
| JD Inc Adr |
| GEAR4MUSIC LS 10 |
JD and GEAR4MUSIC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JD and GEAR4MUSIC
The main advantage of trading using opposite JD and GEAR4MUSIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD position performs unexpectedly, GEAR4MUSIC 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 GEAR4MUSIC will offset losses from the drop in GEAR4MUSIC's long position.The idea behind JD Inc Adr and GEAR4MUSIC LS 10 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.| GEAR4MUSIC vs. Virtus Investment Partners | GEAR4MUSIC vs. Shenandoah Telecommunications | GEAR4MUSIC vs. ECHO INVESTMENT ZY | GEAR4MUSIC vs. Charter Communications |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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