Correlation Between JD and Advance Auto
Can any of the company-specific risk be diversified away by investing in both JD and Advance Auto 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 Advance Auto 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 Advance Auto Parts, you can compare the effects of market volatilities on JD and Advance Auto 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 Advance Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD and Advance Auto.
Diversification Opportunities for JD and Advance Auto
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between JD and Advance is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding JD Inc Adr and Advance Auto Parts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advance Auto Parts 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 Advance Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advance Auto Parts has no effect on the direction of JD i.e., JD and Advance Auto go up and down completely randomly.
Pair Corralation between JD and Advance Auto
Allowing for the 90-day total investment horizon JD Inc Adr is expected to under-perform the Advance Auto. But the stock apears to be less risky and, when comparing its historical volatility, JD Inc Adr is 1.09 times less risky than Advance Auto. The stock trades about -0.06 of its potential returns per unit of risk. The Advance Auto Parts is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 3,745 in Advance Auto Parts on September 4, 2024 and sell it today you would earn a total of 515.00 from holding Advance Auto Parts or generate 13.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
JD Inc Adr vs. Advance Auto Parts
Performance |
| Timeline |
| JD Inc Adr |
| Advance Auto Parts |
JD and Advance Auto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JD and Advance Auto
The main advantage of trading using opposite JD and Advance Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD position performs unexpectedly, Advance Auto 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 Advance Auto will offset losses from the drop in Advance Auto's long position.The idea behind JD Inc Adr and Advance Auto Parts 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.| Advance Auto vs. AutoZone | Advance Auto vs. Tractor Supply | Advance Auto vs. Genuine Parts Co | Advance Auto vs. Five Below |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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