Correlation Between JD and Rai Way
Can any of the company-specific risk be diversified away by investing in both JD and Rai Way 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 Rai Way into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JD Inc and Rai Way SpA, you can compare the effects of market volatilities on JD and Rai Way 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 Rai Way. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD and Rai Way.
Diversification Opportunities for JD and Rai Way
Poor diversification
The 3 months correlation between JD and Rai is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding JD Inc and Rai Way SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rai Way SpA 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 are associated (or correlated) with Rai Way. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rai Way SpA has no effect on the direction of JD i.e., JD and Rai Way go up and down completely randomly.
Pair Corralation between JD and Rai Way
Assuming the 90 days trading horizon JD Inc is expected to under-perform the Rai Way. In addition to that, JD is 2.07 times more volatile than Rai Way SpA. It trades about -0.05 of its total potential returns per unit of risk. Rai Way SpA is currently generating about -0.1 per unit of volatility. If you would invest 530.00 in Rai Way SpA on August 31, 2024 and sell it today you would lose (19.00) from holding Rai Way SpA or give up 3.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
JD Inc vs. Rai Way SpA
Performance |
| Timeline |
| JD Inc |
| Rai Way SpA |
JD and Rai Way Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JD and Rai Way
The main advantage of trading using opposite JD and Rai Way positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD position performs unexpectedly, Rai Way 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 Rai Way will offset losses from the drop in Rai Way's long position.The idea behind JD Inc and Rai Way SpA 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.| Rai Way vs. JJ SNACK FOODS | Rai Way vs. THAI BEVERAGE | Rai Way vs. Tyson Foods | Rai Way vs. Suntory Beverage Food |
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 Valuation module to check real value of public entities based on technical and fundamental data.
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