Correlation Between Meituan and JD
Can any of the company-specific risk be diversified away by investing in both Meituan 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 Meituan and JD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meituan and JD Inc, you can compare the effects of market volatilities on Meituan 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 Meituan with a short position of JD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meituan and JD.
Diversification Opportunities for Meituan and JD
Almost no diversification
The 3 months correlation between Meituan and JD is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Meituan and JD Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Inc and Meituan 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 Meituan 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 has no effect on the direction of Meituan i.e., Meituan and JD go up and down completely randomly.
Pair Corralation between Meituan and JD
Assuming the 90 days horizon Meituan is expected to generate 1.04 times more return on investment than JD. However, Meituan is 1.04 times more volatile than JD Inc. It trades about 0.02 of its potential returns per unit of risk. JD Inc is currently generating about -0.01 per unit of risk. If you would invest 2,121 in Meituan on August 31, 2024 and sell it today you would lose (47.00) from holding Meituan or give up 2.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Meituan vs. JD Inc
Performance |
| Timeline |
| Meituan |
| JD Inc |
Meituan and JD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meituan and JD
The main advantage of trading using opposite Meituan and JD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meituan 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.| Meituan vs. Magnachip Semiconductor | Meituan vs. Zijin Mining Group | Meituan vs. MagnaChip Semiconductor Corp | Meituan vs. Harmony Gold Mining |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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